Elco Shifts Strategy, Seeks Buyers for Supergas and Advances Carrefour IPO

Elco, the holding company controlled by brothers Daniel and Michael Zalkind, has faced significant shifts after scaling back its aggressive expansion strategy. Known earlier in the decade as a prolific acquirer across various sectors, the firm saw its market value peak at nearly 8 billion shekels in March 2022 during a period of zero interest rates.

However, rising interest rates, shifting investor preferences, and varied performance across its broad portfolio led to a 60% decline in Elco's stock, bringing its current market valuation down to 2.7 billion shekels. Consequently, the Zalkind brothers are pivoting toward a more focused approach, channeling capital and management resources into core growth engines while trimming less profitable investments.

One such move involves Supergas, a household gas and electricity supplier in which Elco holds a 61% stake. Acquired from the Azrieli Group in 2019 and floated on the Tel Aviv Stock Exchange a year later, Supergas has seen its shares drop by nearly 70%, reflecting a current value of about 450 million shekels—roughly 39% below its equity. To unlock shareholder value, Elco has engaged Phoenix Underwriting and Tasc to explore a potential sale to a strategic buyer.

Supergas recently sold its natural gas and cogeneration operations to the Aluma Fund for approximately 395 million shekels, generating a positive cash flow of around 290 million shekels and a profit of roughly 20 million shekels. The proceeds will be used to strengthen equity and reduce corporate debt.

Electra Consumer Products, an Elco subsidiary, is also advancing plans to list Carrefour Israel on the Tel Aviv Stock Exchange, a move that would see Electra relinquish its controlling stake of about 50%. The fourth-largest supermarket chain in Israel aims for a valuation of around 800 million shekels, alongside an offering of at least half of Electra Consumer Products' holdings. Despite volatile market conditions, newly appointed CEO Inbal Harson has begun a roadshow targeting institutional investors. The divestment is also necessary to comply with the Concentration Law, which prohibits three tiers of publicly traded holding companies.

In contrast, Elco has reinforced its commitment to Electra Real Estate, its subsidiary managing multifamily housing investment funds in the United States. Although Electra Real Estate's stock dropped by roughly 65% due to high US interest rates, Elco recently participated in a 200 million shekel rights offering, injecting about 94 million shekels to support its ongoing portfolio development.