Israel kicks off much-sought privatization of Israel Post after recovery push
As part of the privatization plan, the government is offering to sell 100% of the Israel Postal Co. to a private investor after completing a financial stabilization process
Sharon Wrobel is a tech reporter for The Times of Israel
Israel on Tuesday kicked off the sale of the Israel Postal Co. after the government reached final agreements last week on the plan to privatize the state-owned firm.
Under the privatization plan, Israel wants to sell 100% of the postal company to a private investor offering the highest bid. The firm has in recent months undergone a major reorganization and recovery plan, including workforce reduction, to save it from financial collapse.
The Government Companies Authority on Tuesday publicized the tender process for the Israel Post sale, which will be advised by investment bank Rothschild & Co. Over the next couple of weeks, an investor conference for local and international interested parties will be held, and an information room will be opened.
The private investor, Israeli or international, will have to have a minimum equity value of NIS 500 million as a precondition for making an offer. By September, interested investors can submit inquiries as part of an initial screening and selection process. The deadline for the final submission of offers is scheduled for first quarter of 2024, after which the winning bidder is expected to be announced.
“The privatization of the postal service is great news – for the Israeli economy, for the treasury, and much more for the general public, who will receive a more efficient, faster and higher quality service,” said Government Companies Authority director Michal Rosenbaum. “The postal service is ripe for privatization… I believe that the potential of the Israel Postal Co. is enormous and I expect investors to show great interest.”
The government has been seeking to privatize its state-owned postal services since at least 2018, after years of the company suffering from a drop in profitability and cash flow and increased competition from alternative services. Previous privatization attempts included plans for a partial sale of the postal company.
In July 2022, the government decided to shelve plans to sell up to 40% of the Israel Post via a public offering on the Tel Aviv Stock Exchange and opted to divest 100% of the firm within 16 months to a private investor tasked with improving postal services and management and helping it undergo a modernization makeover.
Founded in 1948 with the establishment of the State of Israel, the Israel Post became a government-owned corporation in 2006. Today, it serves 38 million customers a year and has over 1,000 service locations around the country — 398 postal branches and 640 pickup and drop-off points — as well as 1.4 million mobile app users. The state-controlled company owns 278 real estate assets, spread across Israel, valued at about NIS 600 million.
The postal company also provides banking services through the Postal Bank, which has about 1 million customers out of whom more than 600,000 have accounts with public deposits of NIS 4.7 billion. Overall, the Israel Postal Co. has some 3,880 employees.
The full privatization is sought to help the postal company, which has undergone a strategic overhaul since 2015, to do away with its “snail mail” image — in line with other global postal firms that have been private for years. The firm, notorious for its poor customer service and long lines, with letters arriving, if at all, with delays, has over the past year undergone a NIS 1.7 billion recovery and financial stabilization process, and formulated a strategic and financial plan for the coming years.
As part of the recovery plan, 1,050 full-time employees or about 20% of the postal company’s workforce is being cut. The reduction in workforce is expected to reduce annual salary expenses by NIS 243 million. The state-owned firm has also defined strategic goals which would require an investment and action plan by the prospective buyer to turn it into the largest e-commerce services company in Israel, and leading provider of financial solutions.
The goals include the introduction of automated services such as automated sorting, self-service kiosk and parcels pickup, payment machines, and online banking services, to adapt to the digital age.
“About a year and a half ago, the company had a ‘going concern’ warning, a rapid loss of market share, and lots of disappointed customers,” Israel Post chairman Mishael Vaknin. “Together with the Finance Ministry, the Government Companies Authority, the Communications Ministry, and a new management headed by CEO David Laron, and the Histadrut workers’ union, we reached the stage of embarking on the privatization in a situation in which the company is more profitable, efficient, growing and focused with a clear strategic plan.”
Following the implementation of the recovery plan, the Israel Postal Co. in the first quarter of 2023 generated adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of NIS 67 million and projects EBITDA of NIS 235 million for the full year, after reporting a NIS 36 million loss in 2022. It expects to post revenue of NIS 1.7 billion in 2023, compared to NIS 1.53 billion last year.
