Baran Acquires Stake in Desalination Operator Amid CEO Departure
Translated & summarized from Bizportal by baba
Baran Group is acquiring a 40% stake in Adom, the operator of the Ashkelon desalination facility, from Veridis for NIS 53.5 million. The deal's low price reflects the concession's expiration in May 2027. The acquisition coincides with the announced departure of Baran's long-time CEO, Yitzhak Frank, raising questions about the company's strategy and leadership. Baran is expanding into income-generating assets, but recent financial results show declining profitability.
The story in 5 lines · by baba
- Baran Group is acquiring a 40% stake in Adom, operator of the Ashkelon desalination plant, for NIS 53.5 million.
- The deal's low valuation is linked to Adom's operating concession expiring in May 2027.
- Baran's CEO, Yitzhak Frank, announced his intention to resign on the same day the deal was signed.
- Baran is shifting strategy towards owning income-generating assets, but faces declining profitability.
- Baran and Veridis are jointly bidding for a NIS 1.5 billion tender to expand the desalination facility.
Baran Group announced its acquisition of a 40% stake in Adom, the operator of the Ashkelon desalination facility, from Veridis for approximately NIS 53.5 million. The deal's low valuation, reflecting a net multiple of about 2.7 based on recent profits, has raised questions, especially given Adom's substantial earnings. Adom reported over NIS 50 million in net profit last year, suggesting Baran's share of profits would be around NIS 20 million annually, with the investment recouping itself in under three years.
However, the low price is attributed to significant risks, primarily the impending expiration of Adom's operating concession in May 2027. Adom is a service provider to the facility, not the concession holder, which is controlled by VID, a partnership between Veridis and Keystone. While the concession can be extended, it may be at reduced rates, potentially impacting future profitability.
Adding to the intrigue, the deal was signed on the same day Baran announced CEO Yitzhak Frank's intention to step down after over 20 years. Notably, Frank was not quoted in the company's statement about the acquisition, which instead featured Omri Gelbart, Franchise Operations Manager. This has fueled speculation about potential disagreements regarding Baran's strategic direction.
The acquisition is seen as a move to deepen the partnership between Baran and Veridis, who are jointly bidding for a NIS 1.5 billion tender to upgrade and expand the Ashkelon desalination plant for a new 25-year concession. This collaboration leverages Baran's engineering and infrastructure expertise with Veridis's operational experience.
Baran, controlled by Avihai Stolero, is undergoing a strategic shift from a project execution company to a group holding production, operation, and income-generating assets. This acquisition, along with a recent purchase of a concrete products company, represents a significant investment of nearly NIS 89 million within weeks. However, the company's recent financial results show declining profitability and net losses in the second quarter of 2026, raising concerns about its ability to translate growth into bottom-line profits. The departure of CEO Frank, after more than two decades with the company, adds another layer of uncertainty to Baran's future direction.
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