Published in Globes on January 16, 2019
A few months after conducting an auction for Salt of the Earth, company owner Shari Arison sold the company to Fortissimo Capital for only NIS 160 million, sources inform Globes. This is substantially lower than the NIS 250-300 million price expected by Arison. Salt of the Earth has stable and profitable activity, NIS 200 million in shareholders’ equity, land zoned for construction of dozens of housing units, and a large stack of cash.
On the other hand, as reported by Globes, Salt of the Earth’s profit margins are low, with NIS 20-25 million in EBITDA a year, and the company’s ability to grow is limited. There is also uncertainty about the company’s land, especially in Eilat, where the municipality is promoting a new outline plan to rezone the land for hotels as well as residential housing.
In the first stage of the auction, Salt of the Earth (formerly Israel Salt Industries), several initial non-binding bids were submitted to the Arison Group. At the end of this stage, as far as is known, the three highest bids were selected, and due diligence was then conducted for the company, followed by the submitting of binding bids for the acquisition. Arison eventually accepted the bid by Fortissimo, led by Yuval Cohen. As far as is known, the Antitrust Authority director general has approved the deal, and closing of the deal is slated for this week.
Salt of the Earth is a marginal holding for the Arison Group, which is in the process of liquidating its investments in Israel. The group last year completed the sale of its shares in infrastructure company Shikun & Binui Holdings Ltd. (TASE: SKBN) to businessperson Naty Saidoff for over NIS 1 billion, and is in the process of selling off its main holding – shares worth NIS 7 billion in Bank Hapoalim (TASE: POLI).
Salt of the Earth is classified as a monopoly. It produces 200,000 tons of salt a year, and supplies 80% of consumption in Israel. The company, whose products are aimed at the retail, industrial, and agricultural markets, was founded in 1922 in Atlit. In the 1950s, ownership shifted to the Dankner family, which developed the company and expanded it to Eilat.
The company’s business took a dramatic turn in 1997, when its controlling shareholders, cousins Nochi and Dan Dankner, used it to acquire the controlling interest in Bank Hapoalim (in the framework of the Arison-Dankner group). In that deal, which made Salt of the Earth a leveraged holding company, Bank Leumi (TASE: LUMI) provided NIS 1.4 billion in financing for the acquisition of 11.6% of Bank Hapoalim’s shares.
Collateral provided for the loan by Salt of the Earth consisted mainly of the land leased by the company used for its industrial activity – thousands of dunam in Atlit and Eilat on which Salt of the Earth’s factories and salt pools were located. The bank appraised the land at a fantastic sum of $200 million, based on an agreement signed by the company a year earlier with Israel Land Authority (ILA), which rezoned the land for construction of thousands of housing units and gave Salt of the Earth extensive construction rights in exchange for evacuating and transferring its salt activity (a measure that was never carried out). Several years later, the State Comptroller severely criticized the agreement between ILA and Salt of the Earth – an affair that later became even more complicated.
Arison acquired the controlling interest in Salt of the Earth from the Dankners in 2007, following a dispute between the parties, and became the sole controlling shareholder in Bank Hapoalim. The deal was at a NIS 1.4 billion company value for Salt of the Earth, which consisted mainly of its holdings in Bank Hapoalim (6% of the share capital). Arison later also acquired the public’s shares in Salt of the Earth and delisted it from the Tel Aviv Stock Exchange (TASE). The shares in Bank Hapoalim held by the company were sold a while ago, and Salt of the Earth went back to focusing on its traditional salt activity.
Fortissimo, a private equity fund headed by Yuval Cohen, was founded in 2004 after Cohen left Jerusalem Venture Partners. Fortissimo manages $1 billion across four funds. The fourth fund raised $470 million three years ago, with demand totaling $1.3 billion, due among other things to the past successes of SodaStream, Nur Macroprinters, and other companies in which Fortissimo invested and made a large profit. Fortissimo recently sold its stake in Kornit Digital (Nasdaq: KRNT), acquired for only $19 million, for nearly $300 million.