The Chinese government's Bright Food Group signed an agreement this morning to buy control of Tnuva Food Industries Ltd. from Apax Partners. The sale is being made at a company value of NIS 8.6 billion which will bring a profit of NIS 4 billion to Apax (56% stake) on which it will not be required to pay any tax.
The kibbutz movement, which owns a 23% stake in Tnuva has decided not to be a part of the deal but Mivtach-Shamir Food Industries Ltd. (TASE:SHAM) (21%) is holding talks on whether to sell its shares to Bright Food. Any side that pulls out of the agreement before completion will be required to pay NIS 140 million compensation to the other party.
As part of the agreement, Bright Food is committed to keep Tnuva center of operations in Israel including management, production and development. Furthermore, most members of the board of directors and management, and the CEO will remain Israeli, while a representative of Bright Food will serve as chairman.
These clauses will undoubtedly assist in easing the receipt of regulatory approvals for the deal and will perhaps prevent protests against the sale. However, the question arises as to whether the Israeli government will have the ability to enforce anything if at some time in the future Bright Food decides to act differently, bearing in mind that the government was not a party to the agreement between Bright Food and Apax.
Bright Food said, "We are proud to acquire Tnuva. For us this is a long-term sound investment that will help Tnuva become a company that enters global markets. It is our intention to continue to keep Tnuva as an Israeli company and continue cooperating with all relevant local bodies including employees, farmers, and cattle farmers to faithfully serve the Israeli consumer."
Apax expects the deal to be completed within weeks and see no problem in receiving the required regulatory approvals.
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