Ace Franchise Deal Faces Revised Terms Amidst Store Count Reduction
Translated & summarized from Calcalist by baba
The global Ace franchise has approved the transfer of its Israeli license to the Ganun Group, but the minimum store requirement has been lowered from 25 to 21. Multi Retail, the Israeli operator, faces a penalty if it misses purchase targets this year. The deal involves Ganun Group acquiring a 72.3% stake in Multi Retail for NIS 168 million. Multi Retail recently reported a net profit of NIS 7.5 million in the first half of the year, a significant improvement from a loss last year.
The story in 5 lines · by baba
- Ace's Israeli franchise license transfer to Ganun Group approved with reduced store minimum.
- Minimum Ace stores in Israel lowered from 25 to 21 until end of 2027.
- Multi Retail faces penalty for missing purchase targets from Ace Global.
- Ganun Group to acquire 72.3% of Multi Retail for NIS 168 million.
- Multi Retail reported NIS 7.5 million profit in H1, reversing prior year's loss.
The global Ace hardware franchise has approved the transfer of its Israeli DIY retail license to the Ganun Group, contingent on meeting certain conditions. However, the minimum number of stores Ace must operate in Israel has been reduced from 25 to 21, a concession granted after the company failed to meet its original commitment. This revised store count is in effect until the end of 2027, after which 22 stores will be required until the franchise agreement expires.
Multi Retail, the Israeli operator of Ace, will also face a penalty if it fails to meet its purchase targets from Ace Global for the current year. The amount of this penalty has been deemed non-material by the company. The reduction in required stores and the potential purchase target shortfall may indicate a lower growth forecast by the acquiring group.
As part of the franchise transfer, Multi Retail will pay Ace Global a $40,000 transfer fee. The outgoing and incoming controlling shareholders have committed to indemnify the company against any claims from Ace arising from breaches of their representations during the deal approval process. The company's audit committee and board of directors have classified the transaction as "beneficial," allowing it to proceed without a shareholder meeting.
The acquisition, initially approved by the Competition Authority two months ago, involves the Ganun Group purchasing a 72.3% stake in Multi Retail for NIS 168 million. Multi Retail operates the Ace, Auto Depot, Beitili, and Urban chains. The sellers are the Kadma investment fund, holding 69.93%, and CEO Itzik Ozana, holding 2.38%.
Kadma, which previously bought Ace from Electra Consumer Products and took it public, had acquired additional furniture retail chains. However, Multi Retail's performance suffered, particularly during wartime, impacting its valuation. In the first half of the year, Multi Retail reported a net profit of NIS 7.5 million, a turnaround from a NIS 4.7 million loss in the same period last year. Sales increased slightly to NIS 356 million, with gross profit margin improving to 51.2% due to a weaker dollar and more focused sales promotions.