Barzilai Infrastructure Halves IPO Price Amid Market Downturn

Y.D. Barzilai, Israel's largest private infrastructure company, is proceeding with its initial public offering (IPO) at a reduced valuation of 2.4 billion shekels, a 20% decrease from earlier estimates of 2.8-3 billion shekels. The company, equally owned by brothers Yossi and Dain Barzilai, aims to raise approximately 1.03 billion shekels from local investors. This adjustment comes amid a cooling IPO market, recent stock market declines influenced by political uncertainty following election results, and a general slowdown in new offerings. The funds raised will support the company's operations, strategic initiatives like building factories for synergistic raw materials, acquisitions of quarries and complementary firms, and expanding its infrastructure activities. Additionally, one-third of the proceeds will be distributed as dividends to shareholders post-IPO.

Barzilai's decision to lower its valuation reflects broader market conditions, including a significant drop in the Tel Aviv 35 index. Despite these challenges, investor interest in the infrastructure sector is growing, driven by anticipated state investments in post-war reconstruction and development. The company's prospectus highlights strong financial performance, with revenues of approximately 402 million shekels in the first half of the year, a 43.5% increase over the previous year, and a net profit of 46.3 million shekels. Barzilai projects revenues of 1.06 billion shekels for 2026, a 72% increase, with a net profit of 113 million shekels, and aims for annual revenues of 3.5 billion shekels by the end of 2029.

The company has a substantial backlog of 48 ongoing projects, valued at approximately 1.96 billion shekels. Key projects include the northern section of Highway 2's fast lanes, expected to generate 474 million shekels, and the expansion of Highway 60 for Moriah Company, projected to yield 305 million shekels. Barzilai is also co-developing the Ramat neighborhood in Katzrin, which will include housing, tourism, public, commercial, and employment spaces, with a total expected revenue of 2.2 billion shekels for the joint venture.

Founded in 1991, Y.D. Barzilai specializes in road paving, bridge and interchange construction, earthworks, railway construction, underground infrastructure, and tunnels, primarily serving municipal and government entities. The company's co-CEOs, Yossi and Dain Barzilai, earned approximately 2.5 million shekels each last year. Their salaries are expected to increase to about 4.1 million shekels each next year, with an expanded workload, after the company becomes publicly traded. While the company also has a significant real estate division, including approximately 5,000 planned housing units and income-generating properties, this segment will remain private due to current market weakness in the real estate sector.