Kadma Fund Offers to Acquire Formica Center Averbuch for $51 Million

Formica Center Averbuch, a small family-owned company primarily involved in importing and marketing wood products, saw its stock surge approximately 50% at the start of the trading week following an indicative offer from private equity fund Kadma to acquire the company. The offer values Averbuch at around 190 million shekels (approximately $51 million), reflecting a premium of about 133% over its market price prior to the offer, which stood at 98 million shekels. The company, founded in 1985 and publicly traded since 1994, operates in wood product import and marketing, flooring, and real estate development, including involvement in TAMA 38 projects.

The Averbuch family holds significant stakes in the company, with individual family members and related entities controlling a majority of the shares. Historically, the stock has seen low trading volume, with no transactions recorded on several recent trading days and a low average daily turnover. The share price had declined nearly 60% since June 2023.

Kadma's offer, which is subject to due diligence, definitive agreements, and regulatory approvals, aims to acquire all publicly traded shares and delist the company. The offer was reportedly presented to the board two months ago, with Kadma granted a 90-day exclusivity period. Kadma, a private equity fund established in 2006, focuses on mid-sized businesses with growth potential and is known for its active involvement in its portfolio companies. Recently, Kadma sold its controlling stake in Ace Auto Depot for an estimated profit of 200 million shekels.

Analysts suggest Kadma is attracted to Averbuch's wood operations, particularly its potential in infrastructure and construction, and its real estate holdings in Ramla, which are adjacent to Kadma's own property. While the offer presents a significant exit opportunity for minority shareholders, particularly given the company's low liquidity and recent stock performance, the deal's completion is contingent on several factors, and the current stock price reflects the remaining risks. The offer also implies that Averbuch's minority shareholders will forgo potential future gains from the company's real estate assets, which Kadma intends to capitalize on.