Pavilion Hourglass is running out: only the Phoenix remained in the game

After a year and a half of contacts with a long line of factors – the mother Nahum Bitan Will be satisfied with a particularly low offer from a group of investors in the lead The Phoenix, Which reflects a decrease in value of NIS 330 million?

The hourglass of the pavilion seems to be running out: the company’s board of directors, headed Shlomo Rodev, Informed the group of investors led by Phoenix that it accepts the low offer to purchase the retail chain controlled by Nahum Bitan.

Rodev Shlomo / Photo: PR

The urgency to accept the Phoenix deal stems from the fact that the group has set a deadline for the acquisition of the chain, which is due to expire on Tuesday night this week. Nahum Bitan now has 30 days with the first right to refuse to accept the Phoenix offer, or to submit a higher counter-offer. Deadline: March 18. If by then Bitan fails to bring another official offer to the table, Phoenix and its partners will take over two-thirds of Bitan Wines shares.

The value shrank after the test

What does the deal currently on the table look like, and how has the value of Pavilion Wines shrunk?

We will start with the latest official offer submitted by the Phoenix-led investor group, the Clearmark Fund, Arkin Investments and Barak Capital. The group is led by Zvika Mans, CEO of Barak Capital Underwriting.

The updated offer is for a relatively small amount of NIS 150 million “before the money”, which includes a transfer of NIS 300 million to the company in exchange for 66% of the shares, compared to the previous offer which included a transfer of NIS 400 million, according to The money “of about NIS 480 million.

Pavilion Wines, La Guardia Branch Tel Aviv / Photo: Kadia Levy

Pavilion Wines, La Guardia Branch Tel Aviv / Photo: Kadia Levy

It now turns out that since signing the Memorandum of Understanding, Phoenix has twice reduced the company’s value in the offer. For the first time, the company’s value was cut from NIS 480 million “before the money” to a value of NIS 350 million, against the background of the due diligence. Later, after the tensions in the Bitan Wines group, the loan that was discovered, and other aggressive measures, the Phoenix reduced its value to NIS 150 million.

From the point of view of Nahum Bitan, this amount seems unacceptable, and even lower than the value that Bitan hoped to achieve for the sale of 13 stores to competing chains in the industry, valued at NIS 300 million. This is also why he has been working hard over the past week to find another buyer.

Where has Electra gone?

And what about contacts with Electra Consumer? About two weeks ago, we revealed in Globes that the company has expressed great interest in Bitan Wines, and has begun contacts with the company under the management of Zvika Schwimmer and which is controlled by Elco by the brothers Michael and Daniel Zalkind. The contacts between the parties then revolved around a similar value, but slightly lower than that offered by the group led by Phoenix – about NIS 480 million before the money. In this context, it is said that most of the money that Electra will transfer will flow into Bitan Wines, and some of it will be transferred to Nahum Bitan. Following this, Electra began an accelerated due diligence.

But from that stage it was exposed to data that appeared in the information room, where also the information collected as part of the due diligence of the group of investors led by Phoenix – including a significant reduction in value performed by the finance group. Against this background, Electra Consumer, which was interested in purchasing the network, also significantly reduced the value it would be willing to pay.

As a result, contacts with Electra have cooled down, and some estimate that they have reached a dead end, with the previous value in question no longer relevant, and contacts with it may only be renewed at a value that will be close to what Phoenix offered.

Pavilion naturally tends to prefer a partnership with Electra Consumer, because it is already active in the retail market through electrical warehouses, and in light of the fact that it is in talks to bring the Saban Elban convenience store brand to Israel.

Adi Zim, the controlling owner of SR Accord, together with the Apax Fund, also examined the possibility of purchasing the controlling shares in the network. However, even contacts in this direction have not matured. Estimates are that reports of new interested parties having contacts with Pavilion are in fact an attempt to push the banks to claim that this is a breach of the financing agreement, in order to torpedo the deal with the Phoenix. On the other hand, there are those who claim that the Phoenix acted to torpedo the deal with Electra Consumer, while others argue that the data in the information room speaks for itself.

Tensions within the society are getting worse

Either way, the low price tag that Phoenix has attached to the network that has now been revealed will make it difficult for Nahum Bitan to bring in another buyer in the amounts discussed in the past, and it is mostly a very harsh statement about what Phoenix found in its investigation. This is not the first time that Phoenix is ​​considering investing in a food chain, when about two years ago it signed a deal with the King Store chain.

This reality led to a sharp tension between Bitan himself and the banks and the chairman of the company, Shlomo Rodev. This week, Bitan made a second attempt to oust him from the company and sent him a letter of dismissal.

Rodev’s presence in the company is part of the financing agreement signed by Bitan with the banks – Poalim and Mizrahi – last August, for an additional line of credit in the total amount of NIS 150 million. In the agreement, the two banks also received an option for shares in the food retail company in the amount of 8% each.

The Phoenix is ​​the largest insurance and finance group in the domestic market in terms of market capitalization, with a company value of more than NIS 6.5 billion. The group has a number of institutional entities, including Excellence Investment House. The group’s investments are managed by Hagai Schreiber, and the group is managed by Eyal Ben Simon.

The Bitan-Mega Wine Group has 148 branches, with a sales turnover of close to NIS 3.5 billion.

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