Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) has acquired 20% of BIG USA Inc. for $30 million from Big Shopping Centers (2004) Ltd. (TASE:BIG). This investment reflects a market cap of $120 million before money.
If the 2012 annual net operating income (NOI) of BIG USA is $28.5-29.1 million, Migdal will pay an additional $2.25 million on top of the set amount, which will reflect a company value of up to $129 million before money.
In the first nine months of 2011, BIG USA assets were responsible for revenue of NIS 112 million, and the NOI was NIS 78.2 million.
Migdal will have one board member and BIG will have four. The deal is set to be finalized by the end of the week.
Over the last few weeks, Migdal has ended negotiations over a few potential investment opportunities purchasing part of Kardan NV (TASE: KRNV;AEX:KARD) unit Kardan Land China, financing Delek Group Ltd.'s (TASE: DLEKG) power stations, and investing in Clal Industries and Investments Ltd. (TASE: CII) through Viola Private Equity. The current deal, like the above-mentioned deals that did not come to fruition, would have become part of the institutional investment management activities Migdal carried out for its members and policyholders.
Migdal has one of the largest portfolios in the market, and is a leader in everything connected to investing. In this way, Migdal has managed to create for itself a number of large direct income-producing real estate investments, mainly in Israel, to create stable yield and a relatively fixed cash flow. Migdal is currently carrying out this large deal in the US real estate market, just as its competitors Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), and Menorah Mivtachim Holdings Ltd. (TASE: MORA) have over the past few years.
BIG, managed by Eitan Bar Zeev, decided to enter the US real estate market in 2010 because of the opportunities that low real estate prices offered, and so far it has invested $95 million through its subsidiary. BIG USA owns 25 commercial centers in the US, 22 of which are in partnership with real estate giant Kimco, mainly in California and Las Vegas. BIG's stake in the aggregate assets is worth $425 million, and covers 225,000 square meters worth of rental space.
At the end of 2010, the Nafali brothers wanted to offer BIG USA shares on the TASE and to raise NIS 70 million according to a market cap of NIS 230 million before money, but the plan was rejected due to low demand in the industrial tender.
In addition to its activity in the US, BIG is considered one of the major players in building and managing open shopping centers in Israel, currently operating 16. BIG's shares are listed on the Tel Aviv 100 Index, and its market cap is close to NIS 1 billion, after falling 16% over the past year.
"We have been working on this deal for a very long time, and under the current circumstances, this is certainly an achievement," Bar Zeev said. "We already have plenty of cash, and we want to continue looking for shopping centers, but there is no pressure. We believe that there will be more opportunities in the US market in 2012 than there were in 2011, during which we acquired almost no properties. This step will enable us to hold a public offering under better conditions, and at more logical prices, but that does not mean that we will go in this direction."
Published by Globes [online], Israel business news - www.globes-online.com - on February 19, 2012
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