The Chinese government's Bright Food Group signed an agreement this morning to buy control of Tnuva Food Industries Ltd. from Apax Partners. The sale is being made at a company value of NIS 8.6 billion while will bring a profit of NIS 4 billion to Apax, which has a 56 percent stake in the company, on which it will not be required to pay any tax.

As it stands neither the kibbutz movement, which has a 23% stake, nor Mivtach-Shamir Food Industries Ltd., a 21% stakeholder, will be part of the deal, although there are ongoing talks on the matter. Any side that pulls out of the agreement before completion will be required to pay NIS 140 million compensation to the other party.

As part of the agreement, Bright Food has to keep Tnuva's center of operations in Israel, including management, production and development. Furthermore, most members of the board of directors and management, and the CEO will remain Israeli, while a representative of Bright Food will serve as chairman.

These clauses will undoubtedly assist in easing the receipt of regulatory approvals for the deal and will perhaps prevent protests against the sale. It is unclear as to whether the Israeli government will have the ability to enforce anything if Bright Food decides to act differently in the future, bearing in mind that the government was not a party to the agreement between Bright Food and Apax.

Apax expects the deal to be completed within weeks and see no problem in receiving the required regulatory approvals.


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