November 5, 2019

"One of the Growth Engines of the Coming Years": Elco Completed the Acquisition of Supergas for NIS 820 Million

The Elco Group, controlled by theSalkind family, reported that all the preconditions for completing the deal havebeen met, including obtaining the approval of the Competition Commissioner andthe approval of the Ministry of National Infrastructures, Energy and Water


Eran Azran

The Elco Group, controlled by theSalkind family, reported today, Tuesday, the completion of the deal to acquirethe gas distribution company, which is fully-owned (100%) by Granite Carmel,from the Azrieli Group. This is after all the preconditions for completion ofthe transaction have been met, including the approval of the CompetitionCommissioner and the approval of the Ministry of National Infrastructures,Energy and Water.

Elco executed the transactionthrough Green Energy, a private company held by it at 98.75%. At the closingdate, Green Energy paid Azrieli Group - including an advance payment of NIS 20million – approximately NIS 577 million, out of the total consideration set atNIS 817 million. The unpaid balance will be paid in seven unequal deferred installments,every 12 months. When the deal will be completed, Azrieli will make a profit ofNIS 380 million from the sale of Granite Carmel.

Supergas is engaged in the distributionof energy substitutes such as LPG, natural gas and compressed natural gas. Theenergy substitutes are used to operate burners in the industry, to operatestoves, to heat institutions, to heat chicken coops in agriculture as well asfor cooking and heating in households. As part of its activities, Supergas carriesout local purchasing, import, storage, marketing and distribution of LPG andnatural gas to industrial companies and to business, institutional and domesticcustomers.

In order to finance the deal,Elco charged a debt on Supergas, in addition to using Elco’s existing cash.Supergas signed financing agreements with two Israeli banks, pursuant to whichthe latter will jointly grant a long-term loan of about NIS 320 million to thecompany - in addition to the short-term credit line. The loan was withdrawn asa dividend and transferred to the seller as part of the transaction costfinancing.

Alongside this, Green Energy hasentered into agreements with two institutional bodies for obtaining loanstotaling about NIS 91 million for a 10-year period, which will bear an annual interestrate of 0.5%. The institutional bodies were granted stock options that allowthem to purchase up to 20% of shares of Green Energy or Supergas for a periodof 10 years, and at an exercise price equal to the value at which which Elcomade its investment.

The revenues of Supergas - whichemploy about 350 employees – amounted to NIS 556 million in 2017, and to NIS572 million in 2018, constituting about 20% of the revenues of the AzrieliGroup. Supergas' operations generated a net profit of NIS 61 million in 2018, i.e.,the deal is completed according to a net profit ratio of 12-13.

Danny Salkind, one of Elco'scontrolling shareholders, led the transaction. Elco was represented by Advs. SharonAmir, Meital Lederman, Noam Shu'ali and Merav Danor of Naschitz Brandes Amir.The Azrieli group was represented by Miki Barnea and Ilan Blumenfeld of BarneaJaffa Lande & Co.

Avi Israeli, VP of Elco BusinessDevelopment, stated: "The investment in Supergas will constitute a newbusiness sector for Elco, alongside existing holdings in Electra Ltd., ElectraConsumer Products and Electra Real Estate. We see great potential in the fieldof energy substitutes, which benefits from long-term stability and customerloyalty, and we intend to work on expanding this activity and becoming one ofElco's growth engines in the coming years."