What's Behind the G-Willi-Food Sale?

Jun.26.07 | About: G. Willi-Food (WILC)

I have received a ton of emails and phone calls asking for an explanation of the controlling shareholders’ selling 45% of their holdings in G. Willi-Food's (NASDAQ:WILC) parent company to Arcadi Gaydamak. The deal was at a 70% premium to the previous close of the stock on Tel Aviv trading. What is interesting to note is the Israeli investing public’s skepticism as to whether this deal will go through.

The stock has moved up 23% since the announcement, a far cry from the 70% premium. The reason is that Gaydamak has been on a shopping spree, buying up one publicly traded company after an another. But last week, after announcing the acquisition of another food company Tiv Taam, also with a similar huge premium, the deal quickly broke apart, and the stock which had jumped, dropped back just as fast. It is important to keep in mind that WILC which trades in the U.S., is a subsidiary, and that is why it has not made the same strong upwards move, although it has been moving up nicely for a long time.

The deal, if it is completed, should be a big help to WILC. Gaydamak, the Russian billionaire, has extensive contacts in the food business in Russia, and throughout Africa, thereby opening up new markets for G. Willi to sell its products. This goes along with our view that the Kosher food business has turned into a very attractive market. This move keeps with our opinion that WILC is a very interesting, long term play in the kosher food business.

Disclosure: The author’s fund is long WILC as of June 25, 2007.

WILC 1-yr chart:
WILC 1-yr chart