The Phoenix buys Green Lantern’s Holmes Place stake

Almost a decade after investing in Holmes Place International (TASE: HLMS), which operates Holmes Place fitness clubs in Israel, investment firm Green Lantern has sold its 19.6% stake in the company to insurance and finance group The Phoenix Holdings (TASE: PHOE) for NIS 93 million, 5% below the market price of the shares, but several times more than it paid for them. Richard (Richie) Hunter, managing partner at Green Lantern, retains a 1% stake in Holmes Place and will continue to serve as chairperson of the company for the next four years, alongside its CEO Keren Shtevy.

Green Lantern’s decision to sell its stake in Holmes Place partly stems from the long period since it made the investment and the approaching deadline for realizing it. The fund, founded by Hunter, Josef Elias, and Daniel Ben-Rei, is limited to investments for periods of ten years.

In 2014, the fund paid NIS 30 million for 45% of Holmes Place. Its holding was later diluted, chiefly by a public offering in 2017. It exits the investment with a nominal return of three times on the money, including its share of a NIS 40 million dividend that Holmes Place distributed this year. Barak Capital Underwriting advised on the sale of the shares.

As controlling shareholder, Green Lantern led the flotation of Holmes Place in 2017 in Tel Aviv. The flotation was supposed to have been combined with a large offer for sale by shareholders in the company, but in the end the company’s pre-money valuation for the purposes of the offering was cut by 40%, to NIS 230 million, and the planned offer for sale was mostly cancelled.

Patience paid off, however, and in the six years since its flotation, Holmes Place has yielded a return of 46%, and its market cap is currently NIS 512 million. The main shareholders in the company now are financial institutions More Investment House, Altshuler Shaham, The Phoenix Holdings, and Migdal, alongside the founders, the Fisher and Kirsh families, and Moti Ben-Moshe.

Growing after Covid

The outbreak of the Covid-19 pandemic and the requirement for social distancing led to the closure of Holmes Place’s branches. The company’s business was stalled for 172 days, occasioning it a loss that wiped out years of profits.

In 2020, Holmes Place’s revenue fell by 53%, or NIS 225 million, and it posted a loss of NIS 77 million, which compares with a profit of NIS 14 million in 2019. The heavy loss led to a sharp decline in the share price, and to postponement of Green Lantern’s plans for an exit.

Since then, however, the company has grown again, and it currently has 60 fitness clubs in Israel and about 178,000 subscribers.

In the first half of 2023, the chain had revenue of NIS 247 million, up 14% from the first half of 2022, and it posted a net profit of NIS 21 million, 29% higher than in the first half of 2022.

Green Lantern, founded a decade ago, has NIS 900 million in assets under management and, according to sources close to the firm, it has yielded an average internal rate of return of 25%. It is currently raising a sixth fund, planned to be NIS 500 million.

To date, the firm has made ten investments. Apart from Holmes Place, these are mostly in food companies, among them Gad Dairies, Feldman Ice Cream, Super Cofix, Yehiam, and Marina Galilee Mushrooms.

Richie Hunter was formerly a consultant with McKinsey. In 2010, he was appointed chief operating officer of supermarket chain Shufersal, and he subsequently served as CEO of McCann Erickson Israel.

Published by Globes, Israel business news – en.globes.co.il – on September 13, 2023.

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