The Chinese company will pay Tnuva’s controlling shareholders $29.4 million.
Apax Partners, managed in Israel by Zehavit Cohen, and Chinese food giant Bright Food has signed an agreement for another three-month extension of the Tnuva Food Industries Ltd. deal until April 2, 2015 at the latest, as of now. In return for the extension, it was agreed that Tnuva’s value for the deal would be $2.20 billion (the original value for the deal), and that the Chinese company would pay Apax Partners and Mivtach Shamir Holdings Ltd. (TASE:MISH) an additional $29.4 million, to be divided according to their relative stakes in Tnuva) in compensation for the extension.
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Mivtach Shamir today announced that the company’s pre-tax profit on the deal, if and when it goes through, is expected to reach $179.4 million.
Bright Food had to postpone the deal, not for the first time, after having trouble paying $461 million for the purchase of Mivtach Shamir’s 21% stake in Tnuva. Incidentally, the current extension is divided into two: until March 24, with an option for Bright Food for an extension until April 2. Several restrictions, including the distribution of dividends, will apply to Tnuva until that date.
The current extension of the deadline for completing the huge deal was apparently given because Mivtach Shamir, controlled by Meir Shamir, decided to exercise its option to join the sale of shares by Apax Partners, Tnuva’s controlling shareholder.
Sources with knowledge about the negotiations for completing the deal believe that the reason for the additional extension of the deal signed in May 2014 is that the Chinese company has not yet found an approved solution for acquiring Mivtach Shamir’s share. The additional time is therefore designed to enable Bright Food to bring a buyer for Mivtach Shamir’s share of Tnuva, or to obtain approval and financing for buying Mivtach Shamir’s holdings itself.
Bright Food has been negotiating in recent weeks to retain Meir Shamir as part of the controlling interest. Shamir demanded in return an option to sell his Tnuva holdings to Bright Food at the same company value granted to Apax, plus a guarantee to safeguard the exercise of the option.
The Chinese company refused to provide Shamir with a guarantee, however, and Shamir therefore announced that he would exercise his option now to join the Apax-Bright Food deal at the same company value for Tnuva given to Apax. Mivtach Shamir has announced that the negotiations were unsuccessful, and it would sell its stake together with Apax when the deal is completed. At the same time, it cannot be totally ruled out that Bright Food will decide later, given its current difficulties, to give Mivtach Shamir the guarantee it is demanding.
In any case, Bright Food has given the impression up until now that if Shamir decides to exit Tnuva, it would bring in a partner to buy his shares. It now emerges that the subject of buying Shamir’s stake is far from settled, with Bright Food being stymied at the moment. As far as is known, Bright Food will either have to find a partner to acquire Mivtach Shamir’s share, or solve the problem of financing the acquisition and obtaining regulatory approval in China for this additional acquisition (beyond the 56% Tnuva stake being acquired from Apax).
Published by Globes [online], Israel business news – www.globes-online.com