Electra is chasing Maimon for Carrefour, Nahum Beitan is preparing to take control from her

In Electra Korvema they confirmed in this report the Exposing “Calcalist” From about a month and a half ago, because in the last few months, negotiations have been going on between Beitan Wines and the banks, to receive NIS 100 million, and at the same time, the possibility of receiving a loan of another NIS 100 million from the shareholders is being considered. This is for the purpose of speeding up the chain’s conversion program and after having already used part of the money from a previous loan that the company took from the banks last April for this purpose.

Yesterday Electra Nevema reported to investors that for the purpose of launching 50-40 Carrefour branches in the first half of 2023, which involves a substantial financial investment of Beitan wines in its branches, the chain is working to obtain financing in the amount of approximately NIS 200 million. About half of the amount the company seeks to raise from banking corporations and about half from its shareholders, when at this stage the final financing terms have not yet been agreed upon with the banking corporations and Beitan Wines is conducting negotiations with them.

As part of the recruitment, if it is carried out, Electra Korva, which owns 35% of Beitan Wines, will have to make a financial investment in the equity of Beitan Wines, from its own sources, which will reflect its relative share in the total investment of the shareholders, amounting to approximately 40 million shekels.

However, here the report reveals that this is a more complex event: “The amount of the company’s final investment will be determined depending on the participation rate of the other shareholders of Beitan Wines in the investment and as a result of the exercise of the factory right (giving existing shareholders the right to participate in the allocation of new shares) available to the company and the shareholders the others”. That is, the streaming on the part of Electra should depend on the willingness of its partners, including the network’s founder Nahum Beitan, to stream his share, something in relation to which there is doubt.

As I recall, in May last year Elektra purchased 35.05% of Beitan wines According to a value of NIS 400 million. As part of the agreement, the company received an option to purchase Beitan’s share (41%) until the end of next year (2023). So far, the Zelkind brothers, the controlling owners of Electra Nevema, have not exercised the option and the last step to raise debt, even if part of it comes from them, heightens the doubt as to whether they will have an interest in exercising it in the coming months.

Shortly after the agreement was signed, Electra worked to find an investor, with the intention of taking part in the exercise of the option. If no one is found, the board of directors approved that Electra should transfer the retail activity in the food and electricity sector to a company called Electra Retail that it established last April, with the desire to create a more attractive proposition for an investor who would purchase 20% of the activity and inject money into the partnership.

The effort did not bear fruit and in April the company raised a loan from the banks to renovate stores in preparation for their conversion to the Carrefour brand. In practice, the company used the loan to renovate 12 small stores, but also for the current expenses of the loss-making chain.

Now it seems that the banks will be ready to provide another loan, if at the same time there is a disbursement from the owner. However, the injection of capital to restore Beitan wines is problematic from the point of view of Electra, because it only owns a portion of the shares, and the injection on its behalf should be made simultaneously by Phoenix, which acquired 15% of the company, and Beitan, which at the time of signing the agreement held approximately 41%, with the balance in the hands of the banks and employees.

But while Electra Korva is procrastinating with the exercise of the option, Nahum Beitan is working to strengthen his power. “Calcalist” learned that Beitan “purchased” from the employees who received from former chairman Shlomo Rodev the options (1.98%) he received, in exchange for 4 company events for employees in the banquet hall of the Beitan family, the last of which took place yesterday.

According to estimates, Beitan is also interested in buying the options (1.97%) held by the former CEO Michael Lubushitz and at the same time, Sue the banks (Hapoalim and Mizrachi Tefahot), claiming that they introduced “abnormal and unreasonable” conditions in the credit agreement signed with them, including the allocation of options worth NIS 100 million to each bank. Thus it seems that Bitan is channeling the time to prepare for the case in which the Zalkind brothers do not exercise the option, and he will once again be the controlling owner of the network he founded. Against this background, it is doubtful whether he has an interest at this point in pouring money into a company that continues to bleed.

As part of the deal signed in May of last year, Electra paid NIS 143 million, which was transferred to Beitan wines, and in addition paid NIS 50 million directly to Beitan itself and gave the chain a NIS 50 million owner loan. In fact, until now Electra Consumers has paid about NIS 200 million for 35% of Beitan wines, which in the first stage took a bank loan of about NIS 260 million to pay off the debts the chain had in those days.

As mentioned, about six months ago, the company took an additional loan of about NIS 230 million, intended for the purpose of converting Beitan Wines branches to Carrefour. However, the company only had time to renovate 12 small branches and part of the money that was raised was directed to cover current expenses, which led to the fact that the company now needs an additional 200 million shekels to carry out the plan to launch Carrefour in Israel, and these will increase the total amount of loans to about 700 million shekels.

Against this background, one can understand why Electra should not be in a hurry to exercise the option in a loss-making company. in its reports for the third quarter summary Elektra Konva revealed that Beitan Wines continues to lose sales, and its sectoral loss deepened in the current quarter to NIS 51 million, mainly as a result of the efficiency plan that includes the layoffs of 350 employees and the closing of 5 loss-making branches. The network’s performance and the consequences of the efficiency plan led to the fact that the food retail arm took a bite of about 75% of the net profit of Electra Consumers, which amounted to NIS 32.8 million in the first 9 months of this year.

Three months earlier, the company published an updated valuation, to the one it published last March, because the chain’s segment profit fell in the second quarter by 51.4% to NIS 5.2 million, following a 3% decrease in sales that amounted to NIS 711.8 million. This was a figure that reflects an annual sales rate of NIS 2.85 billion, which is about 8% lower than what the company predicted in the valuation it published 6 months earlier.

A more extreme gap is found in the expectation of an annual operating profit of approximately NIS 48 million this year, while the company at this stage is showing an operating loss and is expected, according to estimates, to end the year with a loss of approximately NIS 100 million. In addition, the company recently completed the establishment of the joint venture for Beitan Wines and Kwik to establish an online platform, but Kwik itself recorded losses throughout its entire period of activity, so that even if Beitan Wines succeeds in making the operation profitable, in the interim period, it is an additional burden on the company.

The attempts to raise capital are registered at the same time as the renovation of 10 additional branches and plans to convert about 20 more branches during the first half of 2023. This is with the intention that when it finishes converting about 40 stores and will have 1,000 of Carrefour’s private label products in 100 categories, the chain will be launched in Israel through the conversion of 40 The renovated stores for the French brand. Then the company will demand to renovate about 110 more stores, when the financial source of this expenditure is not clear.

At this stage, which is expected at the end of the first half of 2024, the company anticipates that it will complete the conversion of all stores into three formats: a chain of urban stores “Carrefour City”, intermediate stores “Carrefour Market” and several huge stores “Carrefour Hypermarket”. In addition, the company is preparing to launch the credit card for club members.