Shufersal Ltd. (TASE:SAE), Israel's largest supermarket chain, has confirmed plans to spin off its real estate assets, as first reported by "Globes". If implemented, the move could add hundreds of millions of shekels in value for the company and its controlling shareholder, Discount Investment Corporation (TASE: DISI), a unit of Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH).
In its financial report, published yesterday, Shufersal said, "It is considering restructuring the company's real estate holdings. Options under consideration include consolidating real estate owned by the company, which includes fixed real estate assets for investment of the company (including their debts) in a separate company that will be established for this purpose, with the objective of focusing on real estate and/or its redevelopment."
Shufersal's market cap is NIS 2 billion, and the financial report states that the value of its real estate is NIS 2.3 billion. At the end of 2011, the company owned or leased 68 supermarkets with a total area of 131,000 square meters, which it books as fixed assets. The company also owns income-producing real estate, including commercial property, which is leased to third parties.
The value of Shufersal's real estate includes NIS 1.8 billion in buildings and leasing rights, and NIS 484 million in real estate for investment. The company is also building a new logistics center in Shoham, on which it has already invested NIS 70 million to buy the land. The property's final value will be much higher.
IBI Investment House told "Globes" today, "Spinning off the operations will generate NIS 70 million in annual rental income from income-producing real estate, in addition to NIS 120 million in annual rental income from owned supermarkets, for a total of NIS 190 million a year. After amortization, which we estimate at NIS 25 million a year, we're conservatively talking about tax flow (before taxes and management fees) of NIS 165 million for the spun-off company, reflecting the high value of its real estate." IBI concludes, "Spinning off the real estate business into a separate company will generate value for Shufersal's shareholders."
Last year, Dankner tried and failed to sell Discount Investment's 46% stake in Shufersal to Leo Noe and Matthew Bronfman's Isralom Ltd. (which already owns 18.5% of the company).
Published by Globes [online], Israel business news - www.globes-online.com - on August 6, 2012
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