Kadma Fund Proposes $50 Million Deal to Take Averbuch Private

Kadma Fund 2 has submitted an indicative, non-binding offer to acquire Averbuch Formica Center, a company specializing in wood products, Formica, and materials for the furniture and kitchen industries, for approximately NIS 190 million (about $50 million USD). The proposed price is NIS 27 per share in cash, representing a significant premium of about 133% over Averbuch's closing share price of NIS 11.61 on September 10. This offer is contingent upon due diligence, a detailed agreement, and necessary approvals.

Averbuch's board of directors approved proceeding with negotiations and granted Kadma an exclusive 90-day period for its review and discussions. The company disclosed that the report on the offer was delayed according to reporting regulations and was published only after the impediment was removed. The market capitalization of Averbuch, based on the September 10 share price, was approximately NIS 97.8 million, making Kadma's offer represent a roughly 94% increase over this valuation. However, the offer excludes treasury shares and shares held by a subsidiary, meaning the market cap calculation differs from the shares included in the proposed acquisition.

The NIS 190 million figure represents the total consideration for the shares involved in the transaction and should not be interpreted as the company's post-transaction enterprise value, which would account for debt and cash. The NIS 27 per share price is also subject to potential adjustments related to capital and dividends. The proposed transaction structure involves a reverse triangular merger, through which Kadma or its affiliates would acquire the shares, leading to Averbuch's delisting from the stock exchange.

For public shareholders, the deal entails a cash payment for their shares, subject to the transaction's completion. The article notes that while the substantial premium indicates a significant gap between Kadma's valuation and the market price, it does not definitively prove the stock was previously undervalued. Acquiring a whole company allows for control over management and capital allocation, involving a review of liabilities and risks not always reflected in simple price comparisons.

Despite the exclusive negotiation period, Kadma is not obligated to complete the acquisition. The company must first finalize its due diligence to its satisfaction. Following this, binding agreements, corporate approvals including shareholder consent, and any necessary regulatory or third-party approvals will be required. Averbuch emphasized that there is no certainty that the negotiations will result in a binding agreement or that the transaction will be completed.