The controlling shareholder in Cellcom Israel Ltd. announced on Tuesday that it was in talks to sell its majority holding in the Israeli telecom group to private equity firm Fortissimo Capital in a deal worth NIS 925 million ($248 million).
Discount Investment Corp., the holder of a 35.6 percent stake in Cellcom, said it has signed a non-binding memorandum of understanding to divest its controlling core to Fortissimo Capital. The deal values Israel’s largest mobile phone operator, by number of subscribers, at NIS 2.6 billion, representing an 18% premium over Cellcom’s market value of NIS 2.2 billion on December 4.
Shares of Cellcom jumped 7.6% in early afternoon trading on the Tel Aviv Stock Exchange, but are still down 27% since the start of the year.
Under the terms of the memorandum of understanding, Fortissimo was given two weeks to perform due diligence and enter into a binding purchase agreement, which will then be subject to obtaining regulatory approvals. During the two-week period, Fortissimo has exclusivity and Cellcom will not be allowed to negotiate with other potential buyers.
Discount emphasized that there is no certainty that the signing of the memorandum of understanding will lead to a binding agreement for the sale of the stake.
Cellcom is Israel’s largest cellular phone service provider with about 3.5 million mobile phone subscribers, giving the company a share of 31% in the Israeli market. The telecom group offers wireless and fixed-line services and in recent years it entered the market for internet TV via Cellcom TV, and optic infrastructure telecommunication services.
Cellcom owns Golan Telecom, which it acquired in 2020.
Other shareholders in Cellcom include major Israeli institutional investors including Migdal, Phoenix, Harel and Menorah Mivtachim.
For the third quarter, Cellcom reported sales of NIS 1.13 billion, little changed from a year ago. Net income increased to NIS 53 million versus NIS 41 million during the same comparative period.
Founded in 2004 by Yuval Cohen, Fortissimo has $2.7 billion in assets under management and invests primarily in technology and industrial companies. The Tel Aviv-based fund in December 2022 closed its sixth fund with commitments of $1.06 billion backed by large US, European and Israeli institutional investors including, state and corporate pension funds, fund of funds, trusts and insurance companies.
Among Fortissimo’s notable exits are Kornit Digital Ltd and SodaStream International Ltd, which both went public on Nasdaq, the sale of Nur Macroprinters Ltd. to Hewlett Packard, the sale of Cadent Inc. to Align Inc, and the sale of Breezometer to Google.