Tnuva Food Industries

Tnuva is the largest food manufacturer and distributor in Israel and one of its most well-known companies. It owns seven out of the ten most known food brands in Israel and accounts for over 14% of shelf space in supermarkets.

Tnuva was formed over 80 years ago as an agricultural cooperative of 620 farming communities across the country, who were also the company's suppliers of raw milk and produce. Over the years it had been seen by many investors as an attractive proposition but due to the complex ownership structure it was out of reach to potential buyers.

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The deal

Aware of a potential economic downturn, Apax Partners was attracted to Tnuva because of its stable business model: the majority of the company's food products are basic staples (65% dairy-related plus meat, poultry, eggs, fish, frozen vegetables) and so the company was felt to be well placed to weather a recession.

Why Apax Partners?

In 2006, Tnuva opened itself up to a limited auction.

Although Apax Partners' bid was not the highest in financial terms, it was nonetheless perceived as the most attractive. The management and board of the company explained their decision to accept the third highest bid by saying that the expertise and professionalism displayed by the Apax Partners team during the four month due diligence process prior to the bid had convinced them that Apax Partners would be the best partner for the future growth of the company.

Apax Partners' ability through its local presence to understand the different stakeholders' needs and address them appropriately was also critical to the success of the bid.

Post completion

Following the auction there was a lengthy and complex process of negotiation with the agricultural owners of the business, which took almost two years, and necessitated a change in the law and the introduction of new tax codes. The transaction closed in January 2008, with the Apax Europe VII Fund and its co-investor Mivtach Shamir gaining a 77% stake in Tnuva for an enterprise value of $1.4bn.

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What about the future?

Apax Partners believes that the first year after an acquisition is critical to the success of a business and the deal team put a great deal of time into learning more about Tnuva's business and working out where Apax could add value.

By the end of the first year following acquisition, many of the planned changes at Tnuva had been completed. These included sales of some of unused real estate; turning around the fresh meat business, which became profitable in the second half of 2008; hiring new talent and creating a new organisational structure which is expected to enhance synergies across the group.

Led by Zehavit Cohen, who became Chair of Tnuva, the Apax deal team is continuing to work through the numerous projects which were identified as areas where our Funds can add value, as well as exploring strategic alternatives for non-core subsidiaries and potential add-on opportunities.