Israel's biggest and most successful private equity fund FIMI Opportunity Funds, led by founder and CEO Ishay Davidi, has recorded two exits over the past week, having previously completed four other full or partial exits from investments over the past year. Together these six exits have earned FIMI more than NIS 3 billion since making the investments and bearing in mind that FIMI holds stakes in dozens of other companies, this is only part of the picture.
On Thursday, FIMI reported that Universal Motors (UMI) had acquired FIMI's 52% stake in security services company G1 Secure Solutions (TASE: GOSS). Earlier last week FIMI reported that it was selling some of its shares in the Amal and Beyond nursing agency in which it held an 80% stake.
FIMI invested in G1 in 2017, when previous owner global security company G4S succumbed to the BDS movement, and its continual protests against its involvement in Israel. In 2018, FIMI as controlling shareholder held a TASE IPO, selling shares for NIS 150 million. Since then G1's share price has fallen 25% below its peak in 2021
But overall FIMI has made a profit of NIS 270 million in the sale of its stake to G1, which provides security services to companies, institutions and communities and operates in the field of homeland security, and can expect higher activity in the wake of the war.
FIMI together with Amal and Beyond CEO Dalia Korkin has also sold a 20% stake in the nursing agency to Poalim Equity, the investment arm of Bank Hapoalim for NIS 300 million at a company valuation of NIS 1.5 billion.
In December 2021, FIMI acquired its stake from US businessman Harry Gross as well as an additional share from Korkin. So far, the deal has yielded profit of about NIS 500 million, most of it from the sale of the shares to Hapoalim and the rest from dividends.
Nor is this the end of the story. The deal with Poalim Equity is likely to be an intermediate step on the way to an IPO. Estimates are that FIMI will lead Amal and Beyond in a TASE flotation within two years, assuming that the conditions on the market will allow it.
Amal and Beyond has about 30,000 home nursing patients and 15 nursing homes around Israel, with annual revenue of about NIS 1.7 billion. The network has growth engines that include a plan to open dozens of kindergartens for children on the autistic spectrum, as well as opening hostels and activities for the mentally ill.
FIMI's other four exits over the past year were in: Galam, which produces ingredients for food additives (NIS 400,000 profit); Polyram, which manufactures thermoplastic compounds (NIS 700,000 profit); Infinya (Hadera Paper Mills) (NIS 1.1 billion profit); and Gilat Satellite Networks (Nasdaq: GILT; TASE: GILT) (NIS 400,000 profit).
FIMI has now set out its targets for the coming year including expansion in the security and health sectors. According to FIMI's senior executives, the war has created different opportunities. Last week's two deals, which were led by senior partner Lilach Asher-Topilsky, saw profits realized in exactly these two areas, where the fund has invested in additional companies and is expected to examine acquisitions and further expansion.
Davidi tells "Globes," "In a very challenging environment in the State of Israel, our role at FIMI is to know how to operate in any environment and in any market conditions. I believe that FIMI will know how to operate and gain high achievements in 2024 as well."
"Since its inception, FIMI has had significant operations in the security field," says Davidi. "There is no doubt that starting with Covid, continuing with the Ukraine-Russia war and of course the current war, countries are strengthening and arming themselves to deal with the variety of threats against them."
He adds, "FIMI currently operates through a large number of portfolio companies in the field of defense industries, including Beit Shemesh Engines, Ashot Ashkelon, Urdan, Orbit, C. Mer, Tat Technologies and more. I believe that the State of Israel will continue to strengthen the domestic defense industry, which will allow it to face the many threats before it."
Another area in which FIMI is thinking about expanding its focus is health. Even though four years have passed since the Covid pandemic, and due to the difficult fallout of the war on public health in Israel, this sector is expected to grow rapidly the fund believes.
FIMI has invested in four outstanding companies in this field: Kameda, Rekah and Rafa as well as Simplivia, which it acquired from Teva (formerly Teva Migada in Kiryat Shmona).
Low leverage as an ideology
FIMI, which was founded in 1996, specializes in acquiring industrial, commercial and services companies, which it significantly enhances before selling. To date, FIMI has acquired a controlling stake in 100 companies, and sold 67 of them in deals worth more than $7.5 billion. As a holding company, FIMI employs 55,000 people in 50 factories in Israel and dozens more factories and companies around the world.
FIMI operates with low leverage out of ideology. Its companies have debt to profit ratio EBITDA flow of 0.6 on average, while the global average for businesses is usually a ratio of 5-5.5.
Published by Globes, Israel business news - en.globes.co.il - on January 8, 2024.
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