Egged enters the market and is exposed: has begun the process of selling 50%

Egged enters the market and is exposed:  has begun the process of selling 50%

Egged enters the market and is exposed. The largest transportation company in the country, which became a private company from a cooperative two years ago, has begun the process of selling 50% of its shares and aims for a pretentious value of NIS 4 billion. HSBC Bank, whose services were hired by the company, passed initial details to potential entities for acquisition.
1,300 Egged members, who have become its shareholders, are selling 50% of the shares, in light of an agreement led by the government in 2018. Until then, the cooperative was non-profit, in an outdated business structure, and the state sought to privatize public transportation and bring in more players to streamline the system. 91.5% of Egged members supported the move. Most of the buyers' investment will be out, to Egged shareholders, and some in.

The lending bank will try to locate foreign investors for the transaction. Apart from Israel, Egged also operates public transportation in Poland and the Netherlands, although Europe accounts for a small share of its revenues. The Netherlands is 7%, Poland 3%, its subsidiary Egged Tourism and Recreation 9%, and Israel 81%.
As part of the agreement with the state, Egged agreed to reduce its share of 20% of the public bus transportation market in the country, and today it already owns only 32% in terms of kilometers, and in the coming months will decrease to 25% with the sale of Jerusalem lines. The second largest company is Kavim, with 14% of the market.
Potential buyers are local investment funds such as Pimi as well as the Allied Investment Group, infrastructure entities such as Noy or Tashi or listed companies in this field.
The company's revenues are about NIS 4 billion a year. 2020 affected revenues in Israel by NIS 500 million (15.6%) due to the corona closures, and they decreased to NIS 2.7 billion compared to NIS 3.2 billion in 2019 and reduced total revenues to NIS 3.7-3.6 billion. Egged predicts that this year will end with revenues of NIS 3 billion in Israel, and in 2022 they will reach NIS 3.3 billion, similar to 2018. By the end of the agreement with the state in 2029, revenues in Israel will be around NIS 3 billion a year. 72% of the income in the country comes from public transportation, 17% from renting buses to tourists and 11% from renting them to educational institutions. At the end of 2020, NIS 640 million in cash and cash equivalents would be combined. Egged recently sold Egged Transport to the Electra Group for about NIS 200 million (Egged's share of the amount).
The company employs 9,100 people, including 6,760 drivers, and has 4,000 buses. According to Egged, this figure makes it the fifth largest bus company in the world. The company also reveals that the average age of its bus is 6.3 years. According to the company's expectations, in 2025 the average age will be 4.2 years, through the purchase of 2,100 new buses by the end of the agreement with the state in 2029 for NIS 1.7 billion. Egged's salary expenses currently amount to 40% of revenues, and the expectation is that in 2025 this rate will drop to 35% and in 2029 it will reach 30%.
Egged's activity in the light rail supports its bidding in additional tenders in the field of rail. The company also aims to expand the private transportation activity at Egged HaSaim, and sends a message to investors that it is covering up the decline in the activity clusters by increasing revenues on existing ones. Buyers are shown potential in light rail tenders, overseas, in expanding the garage network, as well as in replacing veteran and expensive drivers who will reach retirement age with a cheaper workforce.

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