Elco Group Seeks to Streamline Operations by Divesting Supergas and Carrefour Israel

Elco, a holding company controlled by brothers Daniel and Michael Zalkind, is shifting its strategy from aggressive acquisition to focused growth. Once known as a "Pac-Man of the capital market" for its rapid purchases of companies with leading brands, Elco's stock has fallen 60% since its March 2022 peak of nearly 8 billion shekels. This decline is attributed to rising interest rates, the broad diversification of its businesses, and changing investor sentiment, leaving Elco with a current market value of 2.7 billion shekels.

To address this, the Zalkind brothers are concentrating capital and management resources on core growth engines and divesting less successful investments. One such divestment is Supergas Power, in which Elco holds a 61% stake. Acquired in 2019 and later taken public by Elco, Supergas's stock has dropped nearly 70% since its IPO, now valued at approximately 450 million shekels, significantly below its equity. Elco believes selling Supergas to a strategic buyer could unlock shareholder value. Elco has hired Phoenix Underwriting and Task to explore potential buyers for Supergas, which recently sold its natural gas and cogeneration activities for about 395 million shekels to Aluma Fund.

Another area of focus is Carrefour Israel, a supermarket chain Elco entered early in the decade through its subsidiary Electra Consumer Products. Carrefour Israel is preparing for an IPO on the Tel Aviv Stock Exchange, which would reduce Electra Consumer Products' controlling stake (around 50%) and potentially see it exit its ownership due to Israel's concentration law. The company, which has experienced significant losses, aims for a valuation of around 800 million shekels. Despite a challenging IPO market, a roadshow has begun, with Carrefour Israel's new CEO, Inbal Har'son, engaging with institutional investors.

Elco has also recently increased its investment in its subsidiary Electra Real Estate, which manages investment funds for rental housing in the U.S. Despite a recent stock drop of about 65% due to high U.S. interest rates, Elco participated in a 200 million shekel rights offering for Electra Real Estate, injecting approximately 94 million shekels. The company is continuing to develop and manage its assets, with its fifth fund for U.S. housing complexes having raised about $550 million so far.