Tel Aviv District Court president Judge Uri Goren today authorized the trustees for the Co-Op Blue Square Consumer Cooperative Society (Co-Op) to sell the society’s 75% share in IKEA Israel to Matthew Bronfman for NIS 164 million. IKEA Israel holds a franchise to operate an IKEA store in the Poleg industrial zone in Netanya.
In the hearing, Adv. Lipa Meir, one of the trustees, said that Bronfman had deposited an NIS 8.5 million bank guarantee to secure the first payment. Co-Op will receive 15% of the sale price within fifteen days, and the rest 90 days after that.
Meir stated that one of the restrictions hampering negotiations for sale of the asset was IKEA demand that confidentiality be preserved for IKEA Israel’s business, including refraining from disclosure of sales and profits. The trustees had therefore been obliged to find a creative way of selling the asset.
The method found was to commission a valuation from the internationally renowned PricewatershouseCoopers accounting firm, which estimated the value of Co-Op’s holding in IKEA Israel at NIS 120-133 million, based on the original franchise period, which extended to August 2010. In September 2004, IKEA announced that it did not intend to extend the franchise period.
Meir added that the Bronfman group had bought Co-Op’s holding solely on the basis of the bottom line of the valuation, without checking the figures. He said that the Bronfman group’s legal entity that would manage IKEA Israel would be a new Israeli company.
Adv. Yona Markowitz, who represents Co-Op shareholders, told the court that very little was known about the deal, and that the shareholders had many questions, and a feeling that an injustice had taken place. He complained that representatives of the shareholders had not supervised the sale, and had been completely ignored.
Goren said that any sale would be subject to approval by IKEA International, and that the court could not force it to sell to a specific buyer. He added that the NIS 164 million price appeared reasonable to him; without the commercial talents of the trustees and the supervisory committee, much less would have been offered. Furthermore, the purchaser had deposited a substantial sum in the hands of the trustees.
Goren also stated that the $38 million sale price would give each shareholder NIS 6,000. He therefore approved the deal.
Matthew Bronfman said in response, “I have confidence in the company’s management. I don’t plan to change the management structure.” Shlomo Zohar, CPA, Bronfman’s representative, said, “The Bronfman group will sign a long-term contract with the company’s senior management team. We’ll open another store soon.”
Published by Globes [online], Israel business news - www.globes.co.il - on March 31, 2005