Top executives of China’s Fosun Capital, which manages $10 billion, will visit Israel in the coming days to consider the possible purchase of Meir Shamir’s 21% stake in Tnuva Food Industries Ltd., sources inform “Globes.” Mivtach Shamir Holdings Ltd. (TASE:MISH) declined to respond to the report.
Tnuva’s sales account for 70% of Israel’s dairy market, besides sales of meat, eggs and packaged food. The proposed acquisition will place the bulk of Israel’s food provisions in Chinese hands.
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The sale is designed as part of the deal, already in the advanced stages, for the sale of the controlling interest in Tnuva. Under the deal, private equity fund Apax Partners, managed by Zehavit Cohen, is to sell the company to Chinese food concern Bright Food, at an $2.13 billion company value. The deal between Bright Food and Apax is expected to be concluded on January 5, following a number of delays since the parties signed an agreement in May.
Shamir, a partner in the controlling interest in Tnuva, together with Apax, has the right to join the sale. Bright Food would like to see him continue holding Tnuva shares together with them, but the parties have so far not achieved understandings to Shamir’s satisfaction. The market believes that as of now, the negotiations between the parties are deadlocked.
Bright Food is unwilling to provide Shamir with guarantees that will ensure him an option to sell his holdings in the company in the coming years at the same price received by Apax. It is therefore very likely that Shamir will exercise his right granted him under the agreement with Apax to join the deal. The sale of his holdings in Tnuva is expected to generate $300 million in cash flow for Mivtach Shamir. If this occurs, Bright Food would like Fosun to be the purchaser of Shamir’s stake.
Under the terms of the agreement for the sale of the controlling interest in Tnuva, Bright Food is due to buy Apax’s share in AP.MS.TN. Holdings, a special purpose vehicle for holding Tnuva shares jointly owned by Apax and Mivtach Shamir. Apax’s total direct and indirect share in Tnuva is 56%, and Shamir’s is 21%. The two entities acquired control of Tnuva six years ago. The kibbutzim, who are not part of the controlling interest, own the remaining shares in Tnuva.
Focus on minority holdings
The private equity business of Hong Kong-registered Fosun focuses on investments in minority holdings. According to the fund’s website, it emphasizes investment opportunities resulting from or linked to urbanization and industrialization processes in China. In this framework, the fund invests in private and public companies likely to profit greatly from growth in domestic demand in China. The Fosun website says that the fund began large-scale private equity investments in 2007, and has invested to date in dozens of companies in a broad range of sectors.
A year ago, Fosun Pharma acquired Israeli company Alma Lasers at a company value $240 million, and Fosun Pharma’s CEO said earlier this year that his company was preparing a “blitz” of acquisitions in Israel in the medical equipment sector. The privately owned Fosun parent company was founded in 1992 by four students, and has made several major foreign acquisitions in recent years, including the Club Med international hotel group and a large Portuguese insurance company.
Tnuva’s revenue slid 4% to $430 million in the third quarter. Nevertheless, the company reported a 33% rise to $26.11 million in net profit, among other things as a result of a $7.53 million one-time profit on a real estate sale and lower financing and tax expenses, compared with the corresponding quarter last year. Tnuva’s gross and operating profits fell on both a quarterly level and in the first nine months of the year, compared with the corresponding period last year.
Published by Globes [online], Israel business news – www.globes-online.com