Businessman Assaf Rappaport Buys McDonald's Israel Franchise for $1 Billion
Translated & summarized from TheMarker by baba
Businessman Assaf Rappaport is acquiring the McDonald's franchise in Israel for approximately one billion shekels. The deal values the company at a profit multiple of around 5, with estimated annual revenues of 1.8 billion shekels. This acquisition occurs while McDonald's stock faces challenges globally, trading at a high multiple despite recent declines. Rappaport reportedly beat out several other bidders for the franchise rights.
The story in 6 lines · by baba
- Assaf Rappaport is purchasing the McDonald's franchise in Israel for approximately 1 billion shekels.
- McDonald's Israel reportedly generates 1.8 billion shekels in annual revenue with profits of 180 million shekels.
- The acquisition is seen as a potentially lucrative deal, with Rappaport buying at a profit multiple of about 5.
- Globally, McDonald's stock has declined 24% in six months, trading at a high multiple of 20.
- Rappaport secured the franchise rights after outbidding competitors like Uri Max and Yaakov Shahar.
- The article compares Rappaport's business moves to those of Dudi Wertheim, owner of Channel 12 and Coca-Cola Israel.
Businessman Assaf Rappaport is reportedly set to acquire the franchise rights for McDonald's in Israel for approximately one billion shekels. The deal, described as "almost dreamlike," is for a private company and details are scarce, but industry estimates suggest McDonald's Israel generates 1.8 billion shekels in annual revenue from its 230 branches, with profits around 180 million shekels. This implies Rappaport is purchasing the company at a profit multiple of about 5, potentially allowing for a full return on investment within five years.
The article contrasts this with investing in McDonald's stock on Wall Street, which trades at a much higher multiple of 20. This valuation comes despite the stock's 24% decline in the last six months, underperforming the restaurant industry index and the S&P 500. Such a valuation suggests an investment return horizon of 20 years, highlighting the difference between acquiring an entire franchise and buying a single share.
McDonald's globally is facing challenges, including increased competition and declining customer traffic in the US, exacerbated by the rising cost of living. This difficult period may have presented an opportune moment for Rappaport's acquisition. The article draws a parallel to entrepreneur Liad Agmon, who sold his startup Dynamic Yield to McDonald's for $300 million, describing how he sensed an opportunity and strategically positioned his company to be acquired.
Rappaport reportedly outbid several competitors, including Uri Max of Max Stock, Yaakov Shahar, the Horesh family, and a group led by Ronen Nimni. Notably, Rappaport lacks prior retail experience in Israel, similar to the company's first franchisee, Omri Padan. The article concludes by comparing Rappaport's business portfolio to that of Dudi Wertheim, owner of Channel 12 and Coca-Cola Israel, suggesting Rappaport, as owner of Channel 13, is building a similar business empire, only lacking a bank to complete the picture.
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