February 7, 2021

Electra Consumer Products Enters Into A Partnership with Office Depot at the Ben Gurion Airport Duty Free Shop

Calcalist

Electra has signed a partnership agreement with Office 3000 Duty, to acquire control of it. For a consideration of NIS 5 million. The current agreement allows Electra Consumer Products to enter Duty Free market from the back door, having failed to win the tender for the electricity store two years ago. Electra Consumer Products will also purchase the flagship store of Office Depot in the "Ace Mall" mall in Eilat.

By Orna Yefet February 7, 2021

Electra Consumer Products enters into a partnership with Office Depot in the duty-free activities at Ben Gurion Airport. The company has signed a partnership agreement with Office 3000 Duty, to acquire control of it. Electra has been allotted 50.1% of the share equity of the company which holds a franchise for the operation of duty-free electricity and electronics stores at Ben Gurion Airport.

In addition, Electra will purchase the Office Depot flagship store in the "Ace Mall" mall in Eilat in consideration for several million shekels to be paid to Office Depot in the future.

Upon completion of the share allotment agreement, and after the required approvals shall be obtained from the Competition, Customs, and Airports Authority, Electra will transfer NIS 5 million to Office 3000 Duty, which will be used for loan repayments, store renovations, introduction of new products, working capital and the retraining of 110 employees on the site. The agreement grants Office Depot the right to receive a preferential dividend in the amount of NIS 2 million.

As part of the agreement, Electra's electricity retail division, managed by Shmuel Mandevitsky and Yoram Badash, will establish the store that will start operating next month at Duty Free under the "Shekem Duty Free" brand.

Office 3000 Duty, part of the Office 3000 Group, controlled by Rani Zim, won a tender two years ago issued by the Airports Authority to manage and operate an electronics and electrical goods store in Terminal 1 and Terminal 3 for a period of 6 years with an option for another 3 years. The current agreement allows Electra to enter the Duty Free market from the back door, having failed to win a tender for an electricity store two years ago.

Office Depot won a tender issued by the Airports Authority after it offered excessive royalties in the amount of NIS 54 million, while the minimum authorization fee requested by the authority was NIS 38 million plus NIS 6 million for public areas. The second winner of the tender was the ALM chain, which operated at the Duty Free for 12 years, and offered NIS 48 million in the last tender. Electra Consumer Products offered only NIS 25 million in the same tender and now gets to enter Duty Free market for a much lower price.

The Writing Was on the Wall

The difficulties of Office Depot at the Duty Free began the moment after winning the tender, and the writing was on the wall. Already upon winning the tender, it was estimated that it would have a hard time meeting the high royalties and make a profit. Shortly after entering the store at Ben Gurion Airport, with the "touchit" brand, the company began looking for partners for duty-free activities and held negotiations with the Airports Authority to change the model. It also held negotiations with ALM, a veteran and experienced duty-free player, which was interested in returning to the Duty Free, but these did not work out and the deal with Electra Consumption was finally signed.

Electra should have been able to enter Duty Free under relatively light conditions due to the corona crisis in which the number of passengers dropped to only half a million passengers a year. "Our expectation is that the world will return to normal and there will be an increase in the number of passengers gradually," says Zvika Schwimmer, CEO of Electra Consumer. "Our experience will give us enormous added value in cooperation with Office Depot. This is a good deal for both parties and from Electra's point of view, the deal, which also includes the Ice Mall, gives us a huge advantage in the field of electronics in Eilat and in general. We do not replace Office Depot. The corona is an unusual event. We will continue the work together with Office Depot as partners who have done a beautiful job in the last two years. "

Eighth store in the city of Eilat

The electronics store that is being handed over to Electra at Ace Mall will be its eighth electrical store in the city and it will open under the Shekem Electric brand, and will join the electrical warehouse store that already operates at Ace Mall. The store, which currently operates under the TouchIt brand, is located in the center of the mall, and has about 400 square meters over two floors. Electra will sell care and electrical products for the kitchen and home, mobile devices of all brands, audio products, coffee machines, vacuum cleaners, gaming and computing.

Electra's electricity retail division operates 4,000 square meters of retail space in Eilat, which employs about 100 people. Last September, the electricity warehouse chain launched its flagship store in the city of Eilat, "Duty Free Electricity Warehouses" with an investment of NIS 5 million. From its sales turnover to the end of 2021.

According to Yoram Badash, co-CEO of Electric Warehouses, "In the past year, about 40% of the smartphones in the premium category were sold in the city of Eilat. "The average amount of a deal in Eilat is NIS 4,900, and Wailat currently accounts for about 25% of the chain's sales turnover in the field of technology, communications and computers, with our expectation being to reach one third of the chain's sales turnover by the end of 2021."

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