Beleaguered supermarket chain Mega to shutter stores as buyer is sought

On Friday, the embattled grocery chain decided against making payments in the realm of NIS 50 million to its suppliers.

By NIV ELIS
Updated: JANUARY 18, 2016 02:19
Supermarket. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Supermarket.
(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Grocery chain Mega will close its remaining branches on Monday – at least temporarily – as it battles suppliers over debts.
The Lod District Court acceded to a Mega request for a stay on proceedings for 60 days, during which it will appoint a court trustee to facilitate the sale of the chain. It will convene a discussion Monday at 8 a.m. on Mega’s fate, including a call to any creditor upwards of NIS 50,000 to participate.
On Friday, the embattled grocery chain decided against making payments in the realm of NIS 50 million to its suppliers.
Shraga Brosh, president of the Manufacturers Association of Israel, said going to court was the right decision, as it would keep the chain running and maintain the supply of goods while a buyer was sought.
“It is worth noting that the suppliers of the chain acted responsibly for over half a year, both toward the chain and toward the businesses they run,” Brosh said. Suppliers’ demand for security or cash payments, he added, were perfectly logical.
According to Calcalist, Mega’s debt stands at NIS 1.2 billion, about NIS 477m. of that is owed to suppliers, including NIS 24m. to Cola-Cola Israel, and NIS 88m. to Tnuva.
“The Mega retail chain’s fall was clear in advance,” said Eyal Yanai, CEO of BDICoface. “There was no chance for a recovery plan for the chain, with the level of debt and the high level of competition.” The entire industry, he said, was struggling with lower profits.
Tzach Barki, VP at Dun and Bradstreet’s Economic branch, said that the biggest losers were the small suppliers. While big suppliers could tough out a court proceeding, he noted, others might not survive.
Further, he added, selling the chain to one of the current players could be bad news for the Israeli consumer, as it would consolidate the market.
“It’s clear that the preference of both suppliers and consumers is that the chain be sold to an outside player that’s not in the sector, so that their bargaining power will not be harmed and the prices will remain competitive,” Barki said.
The Histadrut labor federation called on the chain’s 3,500 employees to demonstrate in front of the court, asking it be sold as a whole unit so as to leave more jobs intact.