First Israel Mezzanine Investors Fund (FIMI) will not acquire Gadot Biochemical Industries Ltd. from Delek Group Ltd. (TASE: DLEKG) and Oil Refineries Ltd. (TASE:ORL). In a one-line notice to the TASE, Delek said, "Negotiations between the company and Oil Refineries with FIMI failed to reach a binding agreement."
Delek, controlled by Yitzhak Tshuva, owns 76% of Gadot Biochemicals, and Oil Refineries, a subsidiary of Israel Corporation (TASE: ILCO), controlled by Idan Ofer, owns 24%. Last year, Delek delisted Gadot Biochemicals after an offer to purchase for NIS 8 million. The price reflected a 128% premium on Gadot Biochemicals' value at the time.
However, Delek subsequently made a NIS 230 million write-off on Gadot Biochemicals in 2011. Gadot Biochemicals made a $66 million write-off for its Chinese plant made a $66 million write-off in 2011, including $50.6 million for its Chinese joint venture Jiangsu Gadot Noubei Biochemicals Ltd., which began operations in 2009. During 2011, Delek injected $33 million into Gadot Biochemicals through an owner's loan, which helped the company to carry out regular operations and repay its debts.
Gadot Biochemicals, run by president and CEO Dan Mesika, produces and sells ingredients for the food industry: crystalline fructose, citrate salts, and enrichment minerals. More than 95% of the company's production is exported, which is why the company publishes its results in dollars. The company suffered from falling profit margins in 2011, due to high prices for sugar (a primary raw material), as well as a write-down on its citric acid factory in China, which was not fully utilized, due to high prices for the company's raw material, cassava (a root for the production of ethanol).
Published by Globes [online], Israel business news - www.globes-online.com - on October 17, 2012
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