Yochananof is acquiring control of Zol Stock and is considering an IPO for the chain

The food chain is expanding its activity to the field of discount (‘stock’) stores. It is acquiring control (50.1%) of the Zol Stock chain for NIS 45 million, based on a valuation of NIS 90 million. Yochananof intends to conduct an IPO for the company based on a valuation of NIS 300 million

01.03.20 | Nurit Kadosh

The Yochananof chain is entering the stock discount store market. The food chain owned by the Yochananof Family and managed by Eitan Yochananof is expanding its activity to the field of discount stores. The chain has signed an agreement to acquire control (50.1%) of the Zol Stock chain for NIS 45 million, based on a valuation of NIS 90 million. The acquisition was conducted based on the growth of the discount store market and with the intention to conduct an IPO for the company based on a valuation of NIS 300 million.

Zol Stock operates more than 50 discount stores nationwide and is preparing to open an additional 10 stores in the coming months. The chain is run by Adir Vanunu and Sahar Kochavi, who after the acquisition, control 29.95% and 19.95% respectively.

The acquisition of control of Zol Stock will be conducted by purchasing shares that constitute some 50.1% of the two private companies that coordinate the Zol Stock activity: B.A. Zol Stock Distribution Ltd., which operates as the import and distribution arm of Zol Stock and V. Talia Import and Marketing Ltd., which controls and operates the store chains subsidiaries or franchises. Yochananof will purchase the shares from the four existing Zol Stock shareholders (not in equal stakes), so that after the acquisition, the Group’s shareholders will be Yochananof (50.1%), Adir (30%) and Sahar (19.9%). Adir and Sahar will continue to manage the chain and will be eligible for a grant for expenses.

Eitan Yochananof said: “The deal with Zol Stock is part of the chain’s strategic process to expand and reach every home in Israel through activity that interfaces with our retail food activity. We have identified growth potential in the discount store industry in Israel and the synergy between the activity of the companies will create considerable value and enhance the service experience for the customer. In keeping with the company’s vision, we expect to increase activity by a large margin and to float Zol Stock’s value while investigating the market conditions with the intention of conducting a future IPO.

Zol Stock operates in the field of household products and other products at discount prices. The chain imports and sells various types of products at its stores, such as school supplies, houseware, disposable tableware, plastic products, storage containers, cleaning products, toys, gifts, decorative items, storage products, kitchenware, etc. The Zol Stock stores have a permit to operate as an essential business in times of emergency, because they sell essential products as defined by the Israeli government.

According to the company’s information, the revenues of the entire Zol Stock Group (including revenues from franchised branches) in 2020, totaled NIS 230 million. Zol Stock’s sales in 2020 grew by 27% to NIS 71 million. The operational profit totaled NIS 12.3 million and the operational profitability was 17.3% of the sales ) with the net profit totaling some NIS 8.7 million.

The Yochananof chain, with 28 branches nationwide, is preparing to open 7 more branches by the end of the year. In 2019, the company conducted an IPO on the Israeli stock exchange and its securities are traded as part of the Tel Aviv 90 Index. Yochananof was represented by Adv. Amnon Sorek of Hamburger Evron & Co. Law Firm. Zol Stock was represented by Adv. Oded Oz of Oz Fuchs & Co. Law Firm and Adv. Itai Hoefler of Meir Hoefler Law Firm.

In recent years, the discount market has flourished; and in the past year, it recorded a jump in sales, due to the lockdown during which only stores that sold essential products could continue to operate. Last September, the Fox Group, owned by Harel Wiesel reported that it signed a franchise agreement with the Greek Jumbo chain, which operates at the large branches and sells inexpensive products in a variety of categories – toys, houseware, clothing, baby products, office supplies, etc.

Currently, there is a legal battle ensuing between Wiesel and Ro’I Vanunu, owner of the Jumbo Stock chain, for the use of the commercial symbol of the Greek chain in Israel. Calcalist has revealed that the sales of Jumbo Stock, with its 12 branches, has soared during the past two years by 240% to NIS 62.8 million. The chain is in advanced negotiations with a foreign investor and with a potential partner in order to expand in Israel, which will increase its development even further. Additionally, the chain is in the process of establishing a sub-chain of city stores, which will enable it to compete with Max Stock, whose main activity is run at small stores in city centers. Max, owned by Apex, grew due to COVID-19 and its sales totaled NIS 472.4 million in the first half of 2020, an increase of 34% more than the revenues in the same period last year. The chain recorded a net profit of NIS 38 million in the first half of 2020 as compared to NIS 35.3 million in the same period in 2019.