The company is acquiring control of the Zol Stock chain for NIS 45 million (constituting 50.1% of shares), based on a valuation of NIS 90 million. Yochananof intends to conduct an IPO for the company based on a valuation of NIS 300 million in the near future.
Yochananof was represented by Amnon Sorek of Hamburger Evron & Co. Law Firm, while Oded Oz of Oz, Fuchs & Co. together with Itai Hoefler of Meir Hoefler Law Firm advised Zol Stock.
An Interview with Oded Oz & Itai Hoefler, Oz, Fuchs & Co. & Meir Hoefler Law Firm
When is it a good idea for companies to consider selling a majority stake?
Oded Oz: In this case, the sale of the majority stake was required to ensure the consolidated financial statement of the acquiring entity, which is a publicly-traded company. Moreover, when the acquiring entity is a strategic partner and a key player in the future growth of the company, the majority stake and the control it conveys provides significant incentive for the acquiring entity to harness the full weight of its market influence for the growth of the company.
What are common precautionary measures companies that are selling need to take?
Itai Hoefler: Preliminary caution usually includes signing on the confidentiality agreement and detailed term sheet to ensure that in the event the negotiation fails, the confidential information that the seller disclosed will not remain unprotected and the company is not exposed to misuse of its trade secrets.
Oded Oz: Upon becoming a minority stakeholder, the seller should ask that certain matters will require a special majority vote, to ensure that material matters and important resolutions will not remain in the sole control of the majority holder. In addition to what Oded mentioned, unlike in cases where the seller sells all of his holdings in the company, it is important to ensure that the agreements will provide an agreed structure of how the company is going to be managed following the transaction, and the entry of the new majority and control holder. This includes legal and managerial mechanisms detailed in the transaction documents, but not less important, choosing your future partners diligently.
What aspects do you think are worth negotiating in such a deal?
Itai Hoefler: In these transactions, the key aspects included material issues requiring a special majority vote, and bonus payment upon reaching certain business milestones for the minority holder who will continue to manage the day-to-day affairs of the company.
Oded Oz: Since we insisted that the agreement, subject to certain conditions, include a put option for the sellers, it was important to draft the valuation mechanism for the exercise of the put option. Other standard minority rights included tag along, right of first refusal, and specific management related matters who will remain the control of the minority holders (who, as mentioned, will continue to manage the company).
