Chinese investors continue to regard large Israeli companies as a target for acquisitions, following the acquisition of Adama Agricultural Solutions Ltd. (TASE: ADAMA) by ChemChina and the huge deal for the acquisition of dairy concern Tnuva Food Industries Ltd. by Bright Food (completion of the deal is slated for this week). It now appears that a Chinese concern is on the way to acquiring another Israeli company.
Sources inform "Globes" that Chinese-Israeli private equity fund Catalyst-CEL is leading a group of investors from China in negotiations to acquire 49% of chemicals and fertilizers company Haifa Chemicals Ltd., owned by Eddie and Jules Trump, at a company value of $1 billion.
The private equity fund was founded a year ago by Edward Cukierman's Catalyst group of funds. The most prominent investor in the fund is China's Everbright International, with a company value of $7.2 billion. As far as is known, the Chinese interest in Haifa Chemicals is due to the possibility of expanding the company's business to China.
Cukierman's Catalyst funds have been active in the Israeli market since 1993. Among the companies they has invested in the past are Orex, PowerDsine, Omrix Biopharmaceuticals, and Scopus Video Networks, all of which either held public offerings or were sold. The Catalyst group also currently owns a very small stake in BOS Better Online Solutions Ltd. (Nasdaq: BOSC), in which it was formerly the controlling shareholder, and whose current market cap is a modest $4 million.
A meeting of BOS shareholders recently voted Cukierman off the company board, while his management contract as chairman was extended at the same meeting. The Catalyst fund conducts its activity through the Cukierman investment house, which Cukierman founded in the 1990s, and in which he is chairman.
The Catalyst-CEL fund was founded in February 2014 in order to support Israeli companies wishing to expand in the Chinese market. The fund, which completed its initial closing at $100 million and plans to increase the round to $300 million this year, is aiming its investments at companies in the intermediate and advanced stages with proven innovative technology. The fund has made one investment to date, when it acquired control of Lamina, which has developed cutting technology for chip processing, in August 2014 for $42 million.
Takeover with help from Sagi Genger
Haifa Chemicals supplies potassium nitrate, special fertilizers, and chemicals for industry. The company, founded in 1966 by the Israeli government, has been privately owned since 1989. According to figures from Dun & Bradstreet, it has 750 employees, mostly in Israel, and a sales volume of NIS 2.5 billion. The company CEO and vice chairman is Nadav Shachar.
The current controlling shareholders in Haifa Chemicals are Eddie and Jules Trump (who is chairman). The Trump brothers, who formerly also controlled Gmul Investment Co. Ltd. (TASE: GMUL), acquired control of Haifa Chemicals from businessman Arie Genger, a crony of late Israeli Prime Minister Ariel Sharon, in a hostile takeover. They were previously partners of Genger in Trans-Resources (TRI), and when they gained control of the company, they deprived Genger of all his positions in the company.
In the late 1990s, Haifa Chemicals sank into debt, and Genger sought help from the Trump brothers, who made their money mainly in US real estate deals. In 2001, they acquired 47% of the shares in TRI, leaving Genger with 53%. Later, Genger gave his son, Sagi, 19% of the shares in the company.
When Haifa Chemicals' situation continued to deteriorate, and affected the state of TRI, Bank Hapoalim (TASE: POLI) put pressure on TRI in 2008 to reach a rescheduling settlement for Haifa Chemicals' debt. This was followed by a business dispute between Genger and the Trump brothers, including legal proceedings. At the peak of the dispute, the Trumps managed to convince Genger's son, Sagi, to sell his shares in TRI to them, thereby giving them a 66% controlling interest in the company.
Sagi Genger was retaliating for being removed as CFO of Lumenis Ltd. (Nasdaq: LMNS), controlled by his father. As part of his job, Sagi Genger was exposed to an investigation by the US Securities and Exchange Commission (SEC) against Lumenis and to the plunge in its share. He eventually had to compromise with the SEC, which barred him from serving in any position in public companies.
Published by Globes [online], Israel business news - www.globes-online.com - on March 29, 2015
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