Poalim Capital Markets, the investment arm of Bank Hapoalim (TASE: POLI), is negotiating to buy 17% of Gad Dairy for NIS 75 million, reflecting a NIS 440 million value for the company.
The negotiations have been taking place for several months, and have reached an advanced stage, but there is still no certainty that a deal will take place. If it goes through, the shares will be acquired from Richard Hunter's Green Lantern fund, which owns 49% of Gad Dairy, acquired less than two years ago.
The prospective deal will not be the first case of cooperation between Poalim Capital Markets and Hunter; they previously made a joint investment in Holmes Place, slated for a stock exchange offering in the near future.
Poalim Capital Markets has stepped up its non-financial investments over the past three years, investing in Mul-T-Lock Security Products, Via, and private funds. Its investments in recent years are believed to amount to several hundred million shekels.
Bank Hapoalim is interested in investing in Gad Dairy because it finds the return and risk interesting, and believes that Gad Dairy has good growth potential.
Gad Dairy, which was founded in 1980, is considered a premium brand for cheese. The company has 400 employees. Half of its business is in the retail market and half in the institutional market. Green Lantern, owned by Richard Hunter, Josef Elias, and Danny Ben-Rei, acquired its Gad Dairy stake in December 2015 at a company value of NIS 300 million. If the Bank Hapoalim deal takes place at a company value of NIS 440 million, Green Lantern will make a 40% return on its investment within two years.
Gad Dairly's sales turnover totaled NIS 388 million in 2016, compared with NIS 140 million in 2006, a 177% increase in a decade. The dairy accounts for nearly 4% of dairy product sales in the retail market.
Under a 2007 agreement with Ramat Hagolan Dairies, Gad Dairy became the producer of a private brand for the professional market. The link with Ramat Hagolan Dairies has lasted for many years, enabling Gad Dairy to enter additional retail categories in cooperation with Ramat Hagolan Dairies, such as Shufersal Ltd.'s (TASE:SAE) private brand. Gad Dairy's distribution network has enabled Ramat Hagolan Dairies to expand. In addition, Gad Dairy negotiated this year to acquire Ramat Hagolan Dairies. These negotiations, together with negotiations with Hashomron Dairies, have not yet been concluded.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 7, 2017
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