Israeli clothing chain Castro buys up Hoodies

Castro said buying Hoodies could be considered "part of the company's strategy of expanding its activity in Israel through investment in complementary fashion and lifestyle brands."

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June 25, 2018 19:19
1 minute read.
Castro clothing store, Israel

Castro clothing store, Israel. (photo credit: WIKIMEDIA)

 
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If you’ve landed at Ben Gurion airport recently, you’ve probably seen the ad for Carolina Lemke sunglasses emblazoned across baggage claim. Supermodel Bar Rafaeli helped launch the eyewear brand.

On Monday, the company which owns Carolina Lemke, Castro, bought up its competitor Hoodies in a share swap deal. The acquisition will result in Castro becoming the largest fashion firm in Israel.

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The deal further concentrates market power, creating an Israeli fashion company worth between NIS 1-1.3 billion ($275-360 million). Prior to the deal, Castro was the second-largest fashion company traded on the stock exchange, according to Globes financial daily.

It is possible the acquisition could reduce competition and consumer choice.

Yet according to some market analysts, Castro is buying up Hoodies to prepare for e-commerce giant Amazon entering the Israeli market later this year or next. And the acquisition gives Castro greater bargaining power in talks with malls across Israel, inducing them to further lower rent.

The deal is estimated to be worth some NIS 300 million ($83 million). Castro’s CEO, Gabriel Rotter did not announce plans to shake-up management in either company.

Yossi Gabison is the owner and major shareholder of bought-out Hoodies group – which consists of five brands, including Urbanica, Top Ten and Accessorize.

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In 2016, Castro began acquiring Hoodies and its related chains in a piecemeal fashion – buying around 26% of the company then. Castro had the option to raise its ownership to 50% by October 2018, according to Globes, but instead, the company bought out Hoodies completely.

In a Hebrew statement, Castro said buying Hoodies could be considered "part of the company's strategy of expanding its activity in Israel through investment in complementary fashion and lifestyle brands.”

After the transaction goes through, the CEO Rotter and the Castro family are likely to own a 45% stake in the new company.

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