Last Monday, just before the end of trading, Aluma Infrastructure Fund (TASE: ALUMA) sprung a surprise when it announced the signing of an MOU for the sale of telecommunications infrastructure company Exelera, in which it has an 81.6% stake, to Bezeq (TASE: BEZQ), for $160 million.
If the deal is completed as planned, Aluma will receive $131 million (NIS 440 million), more than double its investment in the company. This is a first, and successful exit for Aluma, and investors were apparently pleased, sending its share price up 30% on the day. Even beforehand, trading in Aluma was positive. It has more than tripled its market cap in the past year, although it is still below the valuation at which it was floated in 2021.
Exelera provides telecommunications services via a fiber-optic undersea cable, and operates a data center. In Aluma’s financial statements, the company is described as its main core holding (the investment is recorded at a fair value of NIS 363 million). “This is our job: to enhance companies, sell them, and invest in new companies,” Aluma chairperson and co-founder Ori Yogev told “Globes.” “We’ll receive the cash, distribute a dividend to our shareholders, and make new investments.”
Aluma was founded five years ago. It currently has four companies in its portfolio: Exelera, Tibar Communication Towers, energy efficiency company Esco Israel, and environment and waste treatment company Chen Hamakom.
The fund bought its shares in Exelera (formerly Tamares Telecom) from Poju Zabludowicz in 2021 and 2023 for cash and shares. The transactions made Zabludowicz the largest shareholder in Aluma, with a 20% stake.
Apart from Yogev, who in the past served as director of the Government Companies Authority and head of the Budgets Division of the Ministry of Finance, Aluma is led by another founder, Muli Ravina, and CEO Yair Hirsh. Ravina, who chairs the fund’s investment committee, says that Aluma will continue to seek new investments in its three areas of specialization: digital communications and telecommunications infrastructure; green energy, with an emphasis on energy efficiency; and environment, with an emphasis on waste disposal.
“We don’t rule out entering other sectors in this category, as long as he company is in a growing sector with a track record, profitable, and with the potential to exceed the growth rate of the sector ” says Ravina. Aluma explains the negative cumulative return in its financial statements on its investment in Chen Hamakom as resulting from problematic timing of its entry into the sector, in which it still believes.
Yogev points out that Exelera was acquired when it had annual sales of $12 million and was making losses, whereas its annual sales are now $30 million, and it is profitable. “This is the business model – to find investments that are not very large, that are sufficiently mature and profitable, or nearly profitable, to identify the potential, and to grow.”
Bezeq already has an undersea cable, through Bezeq International, one of three that connect Israel to Europe. Aluma is not, however, concerned that the deal will be ruled out because of competition considerations. “We checked with restraint of trade experts, who said that it would probably be approved, perhaps with conditions,” says Yogev. “We wouldn’t have gone into the deal had we not thought that it would be approved.”
In recent years, telecommunications cables have been in the headlines because of deliberate damage to cables in Europe in connection with the Russia-Ukraine war. “The mirror image of that is that part of the potential in Exelera lies in its combination of an undersea cable between Europe and Israel and extensions to it that will mostly be land cables. It thus represents an alternative to cables that go through the Suez Canal, the failure being that all the telecommunications cables go through there.”
Yogev: “Today, 95% of the communications traffic between Europe and Asia goes via Suez, and for years there has been talk of the need for an additional traffic corridor. The most logical is via Israel.”
Hirsh: “Today, Exelera is a telecommunications group. When we met the company more than four years ago, it had one main asset, which was the fiber-optic cable between Israel and Cyprus, and a small landing station at Tirat Hacarmel, which is the cable’s starting point. Today, the situation is different. We have grown and strengthened the core business, bought a share in a fiber-optic cable that expands the reach, from Cyprus to Europe, and bought a data center in Cyprus.
“The landing station at Tirat Hacarmel, which was 80 square meters in size, is now a 1,500 square meter server farm. Customers who receive services on the cable also buy storage services, and we’re talking about the biggest players: Amazon, Google, Microsoft, Facebook.”
As mentioned, Aluma believes in the possibility of connecting Europe and Asia by means of telecommunications cables that go via Israel, which means connecting them to other countries in the Middle East, not all of which have ties with Israel, Saudi Arabia being one example.
“At the practical level, not only we, but many Israeli businesses have fruitful and good business connections with countries with which Israel does not have formal diplomatic relations,” says Ravina. “The Saudis also need telecommunications services, which are at the core of any business. It would be very helpful if there were formal agreements that would make it possible to put the relationships on the table, but when it comes down to it, there are significant business relations with players who do not wish to be revealed in current geopolitical circumstances.”
Connection to the state sector
Yogev: “We realized pretty quickly that the area most suitable for our skills is business development, buying infrastructure companies that are growing faster than the sector, getting involved extensively in the business, enhancing it, and expanding the companies. Most other investors in infrastructure – financial institutions and other funds – compete on our playing field, but more in infrastructure in the sense of toll roads, power stations, and desalination plants.
“We thought that the place where would know how to enhance value for investors would be telecommunications, green energy, and waste disposal, and the emerging exit of Exelera reflects that well.”
Hirsh, formerly director general of the Ministry of the Interior, mentions the connection to government. “In the end, the private sector speaks a different language from the government, and sometimes doesn’t how to expand activity in that area. Our backgrounds combine the private and public sectors, which makes it easier for us to expand the companies in these fields with the government and local authorities. We have a deep understanding of regulation and government.”
As an example of this, he mentions Esco, which was bought from Tadiran for NIS 67.5 million. The company won a contract with the Ministry of Health for energy efficiency work in government hospitals, for which it receives part of the saving in energy costs.
Yogev: “To deal with a government tender, to know the constraints on the government, the officials, and the consultants, to be capable of going through long processes and demonstrating to the state that it really is saving electricity and money – those are some of the capabilities that we offer. They also dramatically assisted the company in developing good relations of trust with the Ministry of Health. You have to remember that where there’s infrastructure, there are regulators, and if you don’t have an understanding of that, you earn less.”
To what extent has the war affected you?
Hirsh: “The tough two years that the country has been through have not had an impact on the fund’s companies. We see powerfulness, strength, and stability, and even development despite the war, in part thanks to the dedication of the employees. In the hospitals project, employees actually worked under fire.”
There are other funds and financial bodies that invest in infrastructure. What’s your advantage?
Ravina: “We’re not wizards who can spot all the opportunities, but the model of involvement and the ability to bring to bear the experience of each one of us – finance, global expansion, business development, and interface with municipal and government officialdom – that’s the advantage we bring to the table. We don’t have exclusivity on these things, but we assure the companies and the investors that we have come to work hard and to bring results.”
Skeptical investors
Aluma recently recycled debt when it raised NIS 122 million in a bond offering at 6.56% annual interest, and redeemed a bond series from 2022 the balance of which was NIS 78.5 million and which bore annual interest of 8.25%. As mentioned, the fund’s share price has risen sharply in the past year, outperforming the other listed infrastructure funds – Generation and Keystone – but it is still traded at below its flotation valuation.
Do investors not understand or connect to Aluma’s model?
Ravina: “We’re aware of the criticism levelled at infrastructure investment funds. Sometimes, investment institutions don’t like the way the funds revalue their holdings, and there was the real estate investment trust benefit which would never have been realized without legislation.
“Like the other funds, we have taken criticism that is partly unjustified. Today, we say to investors ‘We’ve done what we said we’d do.’ We said that we wouldn’t dilute them at unreasonable prices, that we would improve our holdings and grow them not just through valuations but in actual exits, and that is what’s happening. That puts us, and our sector, on a path that can rebuild some of the lost confidence.”
Yogev: “In the past, investors were skeptical, but they have seen that sales and EBITDA at our companies have grown, and now there’s also an exit. Our market cap is still considerably lower than our shareholders’ equity (NIS 440 million at the end of the first quarter, S. H-B.), which will grow after the Bezeq deal. Our job is to continue to give proof to investors.”
In your view, how will the Israeli economy look in the next few years, and what significance does that have for your activity?
Yogev: “In Israel’s case, every infrastructure segment will grow in any economic situation, because the population is growing and the standard of living is rising, and that won’t stop. If there’s quiet here, then growth will certainly be even higher.”
Ravina: “The potential of the Middle East to resume its historical role since time immemorial, as a crossroads linking east and west, is very real in my view, because it’s in the interests of all concerned – the countries of the region, the US and the powers – and then Israel could prosper as never before.”
Published by Globes, Israel business news – en.globes.co.il – on July 20, 2025.
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