Kibbutz Yizrael Faces Turmoil Over Decision to Relinquish Control of Mitronics

Kibbutz Yizrael is grappling with internal unrest following the decision to introduce an investor into Mitronics, a company it controls, which will significantly dilute the kibbutz's ownership stake. The kibbutz's holding company and Mitronics' board agreed that bringing in capital through share allocation is necessary given the company's financial distress, despite the dilution of Yizrael's 56% stake. Mitronics carries approximately 600 million shekels in bank debt, and servicing these debts is straining daily operations.

Idan Zils, CEO of the kibbutz's holding company and a Mitronics board member, communicated the decision to kibbutz members last Friday, aiming to calm concerns, especially among veteran members. He emphasized that the kibbutz is not abandoning Mitronics but acknowledged the dilution will reduce its control to a minority shareholder position. The move follows reports that the Israeli investment fund FIMI, managed by Yishai Davidy, is conducting due diligence with an exclusivity period to potentially acquire control of Mitronics.

The announcement triggered a surge in Mitronics' stock price by 39% to a market value of 250 million shekels, a fraction of its 2021 peak valuation of 9.1 billion shekels during the COVID-19 pandemic. The news also caused a two-and-a-half-hour trading halt. Some kibbutz members expressed feelings of regret, believing an earlier sale could have yielded a much higher valuation. Zils requested members refrain from media interviews amid intense press interest. He noted that FIMI is a leading Israeli investment fund with nearly 30 years of experience and that due diligence is expected to take about 40 days, extending beyond the upcoming holidays. Any relevant offer will require approval from the appropriate kibbutz forum.