Description

BSD is a holding company listed in London. Its assets are USD50m of cash and a 62% stake in a business listed in Tel Aviv called Willi Investments. Willi Investments in turn owns a 59% stake in a listed NASDAQ stock called G Willi Food. G Willi Food itself has been written up on VIC and is cheap.

Based on the market cap of G Willi Food, this stake is worth USD33m to BSD. Adding up the value of the BSD cash, a small amount of cash in the intermediary company comes to USD83m. So BSD is trading at a 64% discount to the sum of its parts.

Key risks:

1. Capital allocation: BSD is 44% owned by a Ukrainian/Israeli investor called Alex Granovsky. There is no current plan to dividend out the cash (though see below for a potential catalyst). The current strategy is to invest in Israeli businesses both through G Willi Food (which has its own cash pile) and through BSD. There is not really enough of a track record on Granovsky to really know how good this capital allocation is likely to be.

2. Corporate governance: no sign that the controlling shareholder is screwing minority shareholders and there are plenty of shareholder protections in place in the UK listing and Israeli law to stop it happening but this is certainly a risk.

Catalyst: Granovsky is struggling financially mainly as most of his assets are in the Ukraine which is currently in civil war/being invaded by Russia (depending on your political perspective). One of his holding companies (called BGI Investments, also listed) has a bond payment due on March 2015 and BGI does not have the cash to pay it. Granovsky needs to come up with USD7m to pay that bond. He also owes a private equity group called Fortissimo and another investor USD11m for the shares in BSD (then called Emblaze) that he bought from them a year ago. Unless he raises the cash to repay the bond and what he owes BGI will default and the bondholders will likely liquidate BSD as BGI's only asset. Even if he manages to raise bank financing or sell a stake in the company to another investor that is likely to be positive for minority investors as a new investor may well want the BSD cash dividended up to the holdco.

Conclusion: not without risk but incredibly cheap and a discernible catalyst in the next couple of months

Catalyst

Catalyst: Granovsky is struggling financially mainly as most of his assets are in the Ukraine which is currently in civil war/being invaded by Russia (depending on your political perspective). One of his holding companies (called BGI Investments, also listed) has a bond payment due on March 2015 and BGI does not have the cash to pay it. Granovsky needs to come up with USD7m to pay that bond. He also owes a private equity group called Fortissimo and another investor USD11m for the shares in BSD (then called Emblaze) that he bought from them a year ago. Unless he raises the cash to repay the bond and what he owes BGI will default and the bondholders will likely liquidate BSD as BGI's only asset. Even if he manages to raise bank financing or sell a stake in the company to another investor that is likely to be positive for minority investors as a new investor may well want the BSD cash dividended up to the holdco.