Retail fashion chains are mulling an anonymous appeal to the Antitrust Authority to block the impending sale by Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY.PK) of its malls to the Azrieli Group.
"The Antitrust Authority has been caught napping. What is happening in the commerce sector in Israel is disgraceful," says the owner of one fashion chain. "There are four groups which control 70% of the revenue in the fashion sector, and you won't find that anywhere else in the world. When you stop to think about it, anyone who lives in this country, whether Arab, Jew, or Russian, does his shopping at centers owned by four developers - Azrieli, RIT Israel Malls, G Centers and Big Centers. It is both unreasonable and illogical that a group like Azrieli should also hold the Ramat Aviv Mall. These groups use strong arm tactics. They make one deal conditional on another, buy failing malls and force the owners of retail chains to enter weak malls too at $50 per square meter, when they bought them on the basis of a return of $15-20 per square meter and that way they generate a ludicrous return on a real estate investment within four to five years."
Not unsurprisingly, all the retail chains, large and small alike, which oppose the deal, asked not to be named. Even those who declared to "Globes" that they would be sending protest letters to the Antitrust Authority said they would do so anonymously.
Why? "Because you wouldn't want to see them shut me down tomorrow, and me coming to work at your paper," says one.
There are also those in the market who take a singularly extreme view. "This is mob behavior. You'll find all the rules of white collar Mafia in the offices of some of these groups as well, with the same brutality, and even worse."
The chains' objections relate to the combined acquisition by the Azrieli Group of Africa-Israel and Migdal Insurance's (TASE: MGDL) rights in the Ramat Aviv Mall, and Africa-Israel's rights in the Savionim Mall in Yehud, the City Center in Ashdod, and the "Habama" center in Ganei Tikva, for a total of NIS 1.8 billion.
The Azrieli Group currently controls nine malls, including well-known centers such as the Ayalon Mall in Ramat Gan, the Malcha Mall in Jerusalem, and the Azrieli Mall in Tel Aviv, and owning the Ramat Aviv Mall, considered the flagship indoor mall in Israel, will undoubtedly strengthen its position considerably.
But while most retail chains held the same view there are, nonetheless, those on the market who feel differently. "They certainly are aggressive but they are also professionals," says Eran Levy, one of the owners of fashion chains Crazy Line, and Lucci. "I have done nothing but gain in every mall they forced me to take a store in. Our branches at the Herzilya Business Park and the Or Yehuda Outlet have been doing very well indeed. They're a professional company, and it is accepted practice worldwide to have large groups like these. True, they do use force, bring in brands and get the mall working, but that makes it easier for me as well. If I want to open Lucci stores, they know I'm good and I can enter any of their malls instead having to negotiate with each mall individually. If you aren't good, they won't force you to open in malls that are weak. In the final analysis, there hasn't been a single mall that they let me into where I lost money."
Published by Globes [online], Israel business news - www.globes-online.com - on July 21, 2008
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