Merger deal will triple Emilia Development value

Oded Feller  photo: Einat Levron

The company will buy Oded Feller's shares in Chemovil for an estimated NIS 500 million.

The huge deal by Emilia Development (OFG) Ltd. (TASE:EMDV), which businessman Oded Feller is promoting, and in which he has a controlling interest, is reaching the crucial stages. Feller, who owns 84% of Emilia Development's shares, wants to merge into it Chemovil, a private company of which he has full ownership, in a share swap. The deal will create a merged company with a fair value of NIS 750 million and a market cap of NIS 650 million. The Emilia Development shareholders will be asked on Tuesday to vote in favor of this party at interest transaction. Approval is expected, after Entropy, a company providing consultant services to investment institutions, expressed support for the deal. Entropy believes that the deal terms are fair and reasonable, after being formulated in an independent process with the help of external advisors.

The minority shareholders in Emilia Development include three institutions - Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Psagot Investment House Ltd., and Meitav Dash Investments Ltd. (TASE:MTDS) - that jointly own 8% of the company (half of the minority holdings). Most of the other minority shares are held by private investors, and past experience shows they do not usually vote at Emilia Development's general shareholders' meetings, so that support from the three institutions will probably enable the deal to go through.

Emilia Development is a holding company with five main assets: 100% ownership of Emilia Cosmetics (formerly Careline), 58% of the shares in Mendelson Infrastructures and Industries Ltd. (TASE:MNIN) (with a market cap of NIS 154 million), 15% of the shares in Maxima Air Separation Center Ltd. (TASE: MAXM-M) (a manufacturer of gases for industry and medicine – a market cap of NIS 40 million), a 25% stake in raw materials company Palziv (controlled by Kibbutz Ein Hanatziv), and a 7% stake in Tene Investment Funds Ltd., which invests in kibbutz companies. The latter has produced large profits for Emilia Development through the sale of its investment in Caesarstone Sdot Yam Ltd. (Nasdaq: CSTE) and SCR, which develops cowshed management systems.

Emilia Development has NIS 205 million in equity and a NIS 220 million market cap. A valuation by PricewaterhouseCoopers before the merger deal according to the discounted cash flow method gave Emilia Development a NIS 252 million fair value, while Chemovil was valued at NIS 503 million. The complex deal will result in Feller holding no more than 87% of the shares. Chemovil, acquired by Feller in 1997, supplies services, raw materials, and chemicals for industry. It produces and imports raw materials and provides services in transportation and storage, water treatment consultation, laboratory services, supervision of food products, and treatment of industrial and medical waste.

Chemovil finished 2016 with a 2% growth in revenue to NIS 454 million and 24% growth in pre-tax profit to NIS 26 million. During the past two years, Chemovil generated NIS 46 million in EBITDA, and its equity is NIS 277 million. The merger deal to be voted on at the general shareholders' meeting is rather complex. Emilia Development will buy all of Oded Feller's shares in private company O. Feller Holdings, through which he has until now held his shares in both Emilia Development and Chemovil. In exchange for the acquisition, Emilia Development will allocate new shares in itself constituting a 94.6% holding, while all the previous controlling shares will become dormant shares. Immediately after this allocation is made, however, another stage in the deal will take place, in which Feller will sell 4.9% of the new shares (1.18 million shares) that he received in the offer for sale to the public, while at the same time, the company will issue at least 883,000 more new shares to the public. At the end of the process, Feller will own no more than 87% of the shares. The proceeds from the issue will later be used to distribute a dividend to all the Emilia Development shareholders.

This huge deal will triple the value of Emilia Development.

Published by Globes [online], Israel Business News - www.globes-online.com - on May 18, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Oded Feller  photo: Einat Levron
Oded Feller photo: Einat Levron
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