Isaac Dabah Buys Out 23% of Delta Galil; Stock Soars

U.S. businessman Isaac Dabah has bought 23 percent of Delta Galil Industries from the Sara Lee concern, for $27.7 million. The news sent Delta's stock up 7.5 percent in Tel Aviv yesterday and up 13 percent on the Nasdaq by midday.

Dabah bought the shares via his company GMM Capital. The acquisition agreement assures Delta's founder and chairman, Dov Lautman, of a majority on the board of directors.

Lautman says that Sara Lee's investment in the Israeli company, which specializes in men and women's underwear, had been mainly financial in nature, and in any case the American company had operated in competing areas as well.

He added that he was pleased at Dabah's investment as a strategic partner in Delta.

Dabah, 48, was born in Israel but operates in the U.S., mainly in textiles and clothing. His company GMM Capital has several holdings in retail, clothing and textile, in which Dabah himself has specialized for some 25 years. Dabah also has several investments in Israel, including in the Habas real estate company and in Badei Jeans of Kiryat Gat, which he bought from Polgat.

Lautman himself owns 25 percent of Delta. His agreement with GMM stipulates that Lautman will continue to chair the board and will have the right to appoint seven of 12 directors, assuring his control. Dabah will have the right to appoint three directors. Two others are external.

The move cannot come too soon for Delta, a manufacturer of intimate apparel for men and women, which failed to enjoy the stock market boom of 2004. Since July 2004, when one of its major customers, British retailer Marks & Spencer, asked all its suppliers, including Delta, to lower their prices, Delta's stock has moved decidedly in one direction - downward. It has lost half of its value since then, and was trading at a low of around $6.80, until yesterday.

The deal with Dabah sets a price of $6.50 a share, which reflects a 4 percent discount on its traded price. By midday yesterday, Delta's stock had reached prices of around $7.60 on Nasdaq.

The sale by Sara Lee had not surprised many, as the company had been spinning off all its clothing-related assets. The Delta stock was sold to Dabah at Lautman's own recommendation: He had the right of first refusal on Sara Lee's shares. Lautman said that six other parties had expressed interest in the holding, but their advances were rejected.

Delta hopes that Dabah's experience in managing brand textiles and clothing in the U.S. will pay off for the company. This optimism is also based on the U.S. starting to restore some restrictions on textile imports from China, as well as Delta's latest patented product and its recent efficiency drive. The latter has consisted of dismissing 2,000 workers - some 16 percent of the company's worldwide work force - in Honduras, Canada and Israel. All its Israeli operations will be combined and concentrated in its Carmiel center. Delta will also be laying off 500 local staffers and transferring manufacturing to other countries.

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