Two weeks before the end of the period allotted to Nahum Bitan to present a deal to invest in Bitan Wines, against the proposal formulated by the company’s chairman Shlomo Rodev with a group of investors led by the Phoenix Insurance Company, Bitan signed a memorandum of understanding with Yigal Damari and Keren Shaked.
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As part of the deal, which was revealed on the Calcalist website, it was determined that Damari and Keren Shaked will transfer NIS 150 million to the pavilion for about 30% of the holdings and at a company value of NIS 350 million before the money. This is a convertible loan, towards prospectus To be carried out on the basis of 2020 results and subject to the Company’s lien to investors. Damari will transfer NIS 100 million from the amount privately and not from the public company, and NIS 50 million will be transferred by the Shaked Fund, headed by Gil Deutsch, Anat Hollander and Uri Rubin. The agreement leaves control of the company in the hands of Pavilion. The parties have been negotiating in recent weeks and reached final understandings on Thursday night, which require the approval of the banks, with whom the parties will meet earlier this week.
This is a deal that is supposed to replace the deal that Rodev formed with a group of investors led by Phoenix, which was approved by him on the company’s board of directors. However, there is doubt as to the banks’ willingness to give up Phoenix’s offer to inject capital in sufficient amount to cover the company’s debts, in favor of Damari and Shaked’s offer based on a loan. It is not inconceivable that the memorandum of understanding signed with Damari and the Shaked Foundation is intended to assist the pavilion in the legal battle it is expected to wage if the banks reject the offer and accept the Phoenix deal that Rodev drafted. A pavilion will be able to show that it has had an alternative offer and take action to delay the sale.
The pavilion has obligations to various parties, including NIS 250 million and a credit line of NIS 150 million granted to it by Bank Hapoalim and Bank Mizrahi Tefahot, to which the company’s shares have been pledged for about three years and to which stock options were granted last year. Another significant factor is the mega trustees from whom Bitan purchased the municipal store chain in 2016 for NIS 450 million, with the balance of the debt standing at about NIS 86 million, along with a lien to the trustees until the full consideration is completed. In order to promote a transaction with an investor, Pavilion must repay its debts to banks and trustees and register a lien to investors.
Wrestling scene
According to Bitan, he is not required to repay the entire debt estimated at NIS 340 million as a condition for the transaction to be approved by the banks and trustees, but is required to close the NIS 150 million line of credit he received from the banks last year to release the lien. In addition, if necessary, it intends to increase the amount through credit card balances and profit recorded by the company, according to its environment, in the past year. In addition, the sale of branches to competitors is still on the agenda, in favor of raising tens of millions of additional shekels. However, the banks have before them the Phoenix proposal, which, although it expropriates control from the hands of Bitan, guarantees a full and immediate repayment of the debts.
Yigal Damari, Nahum Bitan Photo: Zvika Tischler, Amit Shaal, Uriel Cohen
In the background, there is an acute crisis of confidence between Bitan and Rodev, which led to a complete rupture and repeated attempts by Bitan to fire Rodev without success. What began as Bitan’s appeal to Rodev to take on the role of chairman of the company, recover it for Knesset investor and make it public, became within a few months a battleground. Bitan believes that Rodev is working to deprive him of his rights and control the company he founded and bears his name. Revealed that he had been misrepresented in relation to the company’s condition and the circumstances that led it to record heavy losses in the years it was run by Pavilion.
As revealed in Calcalist, in the first half of 2020, which was the peak year of the food retail market in terms of sales and profit due to the Corona crisis, Bitan Wines recorded an operating loss of NIS 20 million on sales totaling NIS 1.9 billion. Bitan ended 2019 with an operating loss of NIS 140 million on sales of about NIS 4.2 billion. This is almost three times the operating loss, which in 2018 amounted to NIS 55 million on sales of NIS 4.7 billion. Thus, since the beginning of 2018, the chain has recorded an operating loss of approximately NIS 215 million.
Along with the chain’s recovery efforts, Rodev reached agreements in mid-November with a group that included Phoenix, the Clearmark Fund, Mori Arkin and Eyal Bakshi’s Barak Capital, according to which the group will invest NIS 400 million for 45% of the chain’s shares. The deal reflected a value of NIS 890 million for Pavilion Wines after the money. Bitan opposed a move that took control of him and acted without success to try to recruit other investors, including Adi Zim and Zehavit Cohen from Apax; The Zalkind brothers, controlling owners of Electra Consumer; And a blue square oak controlled by Moti Ben-Moshe. At the same time, and after conducting a due diligence that revealed that the company’s situation is more complex than it thought, Phoenix last month submitted a new investment offer of NIS 300 million at a value of only NIS 150 million to the chain.
Banks with Rodev
About two weeks ago, Rodev approved the Phoenix proposal on the board of directors that appointed him and Bitan or his representative, CPA Avi Toledano. In response, Bitan fired Rodev and announced that the approval of the deal was given without authority. But Rodev has an advantage over Bitan. In the event of disagreement, Rodev is also backed by the banks that sent a letter to the pavilion informing him that his steps violated the financing agreement signed between them. On the other hand, Toledano, who represents the pavilion on the company’s board, accused Rodev of a conflict of interest.
Against the background of estimates that the fight between the parties will go to court, it seems that Bitan’s proposal with Damari and Keren Shaked, according to a high company value (NIS 350 million), in relation to the value of the Phoenix proposal (NIS 150 million), is intended to help delay the Phoenix proposal. By Rodev and the banks, which could cause Phoenix to withdraw from the deal. On the other hand, it is doubtful whether in view of the agreements he signed with the banks, in the framework of which he transferred the shares to them, these will allow the pavilion to frustrate the transaction.