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Sale of 20% stake of postal company kicks off

State hopes to raise NIS 200-250 million from strategic investor in firm that holds 90% of online shopping delivery market

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Israel Postal Company has the capacity to sort some 100 million packages a year (Courtesy)
Israel Postal Company has the capacity to sort some 100 million packages a year (Courtesy)

Israel on Tuesday kicked off the first part of a sale of its postal company, hoping to make to get between NIS 200 million and NIS 250 million ($58 million -$73 million) in exchange for a 20 percent stake to a strategic investor.

In a second stage, an additional 20% of the Israel Postal Company will be sold in a share offering to the public, with the government continuing to hold at least 60% of the firm for strategic purposes.

The first tranche of the stake sale should be complete by June 2021, with the second tranche to be sold off on the stock exchange sometime in 2022.

“The privatization of Israel Post is one of the most significant moves in a series of privatizations that we are leading among government companies,” David Amsalem, the minister for cyber and national digital matters, said at a press conference in the central town of Modiin.

Delivery trucks of the Israel Postal Company (Courtesy)

“We believe that bringing in an investor of this magnitude will allow the post office to continue to grow and take off, and offer better and more efficient service to the general public, in the center and in the periphery [of the country].”

Most of the money made from the privatization of the firm, which employs 5,500 workers and handles 90% of the delivery of items bought online, will go to strengthen the firm, Amsalem said. Online sales in Israel totaled  NIS 14.5 billion in 2020, and are expected to grow to NIS 24.3 billion in 2024, according to data compiled by statista.com and provided by the firm.

The privatization may 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 already been private for years.

In 2018, a ministerial committee in charge of the privatization of government-held companies approved the sale of a 40 percent stake in the the Israeli postal firm, but the share sale was held up due to political instability that led to three elections within a year.

Dany Goldstein, CEO of Israel Postal Company, left to right, Yaacov Kvint, the head of the Government Companies Authority, David Amsalem, minister for cyber and national digital matters and Hezi Zaig, the chairman of the board, at the Postal Company’s logistics center in Modiin; July 14, 2020 (Courtesy)

The strategic investor, Israeli or international, will have to have a minimum equity of NIS 250 million and assets for a minimum of NIS 625 million, and experience in customer service and in delivering packages and mail, among other qualifications.

“We estimate we will get NIS 200 million to NIS 250 million” from the sale of the 20% stake, said Yaacov Kvint, the head of the Government Companies Authority, in charge of privatizing government-held firms.

“The attractiveness of investing in Israel Post is particularly great, as the company has undergone a significant transformation with a clear strategy for years to come, with more growth opportunities and attractive financial forecasts,” he said. The investor will have a significant say in company activities via its representatives on the board.

The Israel Postal Company, which is the nation’s largest logistics operation, has over 1,300 service locations around the country and some 1,500 mail carriers. The firm had revenue of NIS 1.82 billion in 2019, and operating profit of NIS 46 million.

Since 2015 the company has undertaken a restructuring plan that involved new distribution centers, a reorganization of its operations and a cut in employees.

The postal company provides banking services, is seeking to become a social bank, and provides retail postal services, foreign trade and delivery services and logistics.

Online commerce will be a key growth driver going forward, said Dany Goldstein, the CEO of the postal company. The company delivers packages from Amazon, Ali Express, Asos and all other major online retailers.

Some 39% of revenue in 2019 stemmed from the delivery of online commerce packages, while 36% stemmed from the traditional postal service and retail activities, he said, compared to 31% and 46% in 2016.

Israel Postal Company workers sorting packages (Courtesy)

Growth engines

Other growth engines for the firm will be the expansion of its logistics services to cater to small Israeli businesses that are eager to export their products overseas via sales on ecommerce sites, and the development of a digital wallet for customers, which it hopes to launch by the end of the year, Goldstein said.

In addition the company is seeking to set up an insurance service for customers who travel abroad (they can already buy foreign exchange at the postal bank) or acquire a car (the transfer of car ownership is done at the post office) and is looking to find opportunities in the increased provision of medical services at home as opposed to in hospitals.

“To do this, they must move and bring stuff,” Goldstein said, and the postal company is at studying what services it will be able to provide in this context.

The company has the capacity to sort some 100 million packages a year and has one of the most advanced computer systems in the country, he said.

The coronavirus pandemic is expected to cut revenues this year by some 20%, or some NIS 450 million, as grounded planes delivered fewer packages and people bought less foreign exchange for travel, Hezi Zaig, the chairman of the board of directors at the postal company, said, adding that business was expected to get back to normal next year.

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