Temis and Mey Eden: How Much of 2025 Was Operating Recovery and How Much Was Purchase Accounting
Mey Eden did post a real operating recovery in 2025, but most of what Temis itself booked from that recovery still came from a bargain-purchase gain of ILS 17.5 million. This follow-up isolates the gap between a business that improved and a reported line that still leaned on purchase accounting, management fees, and valuation assumptions.
The main article argued that Temis's bottleneck is no longer identifying the asset. It is figuring out how much of Mey Eden's value actually turns into listed-company value. This continuation isolates one layer inside that question: earnings quality in 2025.
Two statements that sound contradictory are both true. First: Mey Eden did deliver a real operating recovery in 2025. Second: the profit that Temis itself recognized from Mey Eden in 2025 still came mainly from purchase accounting, not from recurring equity earnings that had already settled into the line.
That gap matters. It is easy to look at Temis's reported numbers around the deal and assume that Mey Eden's improved economics immediately translated into high-quality earnings at the listed-company layer. That is not what the breakdown shows. The acquired business improved. The line Temis booked in 2025 still ran ahead of that reality.
| Layer | What happened in 2025 | What it says about earnings quality |
|---|---|---|
| Mey Eden itself | Revenue rose to ILS 565.7 million, operating profit rose to ILS 33.6 million, and net profit reached ILS 18.8 million | There was a real business recovery |
| Temis's equity-accounted line | ILS 15.2 million, of which ILS 17.5 million was bargain-purchase gain | The reported contribution was not yet recurring profit |
| Management fees | ILS 5 million expense at Mey Eden, ILS 2.5 million revenue at Temis | Part of the economics was shifted between reporting layers |
| Purchase-price allocation | Brand, land, right-of-use assets, inventory, and deferred tax asset were stepped up | The bargain gain was a valuation outcome, not cash created in 2025 |
Mey Eden Did Recover Operationally
The first thing to clear off the table is that Mey Eden's improvement was not a PPA fiction. The business itself looked better in 2025. Revenue rose 8.7% to ILS 565.7 million, gross profit rose ILS 33.9 million to ILS 315.3 million, and operating profit jumped to ILS 33.6 million from just ILS 16.2 million in 2024.
The improvement also shows up below operating profit. Net finance expense fell to ILS 14.1 million from ILS 21.0 million in 2024, and net profit moved from a loss of ILS 32.3 million to a profit of ILS 18.8 million. This was not just a prettier accounting line. The underlying economics of the business were stronger.
What matters is that this improvement happened even after a new ownership layer was already sitting on the company. General and administrative expenses included ILS 5 million of management fees, and other expenses reached ILS 13.0 million, including ILS 10.7 million of sale-transaction costs. In other words, even after transaction costs and a new management-fee mechanism, the business still finished the year materially stronger.
This chart matters because it separates the business improvement from the accounting noise around it. Gross profit grew much faster than selling and administrative expenses, so operating profit still more than doubled even after the cost base got heavier. Anyone arguing that the bargain gain "created" 2025 is going too far. The operating recovery came first.
But this is where the crucial split begins: a better year at Mey Eden is not the same thing as the earnings Temis recognized from Mey Eden in 2025. Those are two different layers.
In Temis's 2025 Numbers, The Line Was Still Mainly Purchase Accounting
This is the real earnings-quality issue. Temis's equity-accounted profit from Mey Eden totaled ILS 15.2 million in 2025. At first glance that looks like a very strong contribution from the investment. The breakdown says something else: ILS 17.5 million of bargain-purchase gain, offset by ILS 1.5 million of Temis's share in Mey Eden's loss from the acquisition date and ILS 0.8 million of original-difference amortization.
That leads to one sharp conclusion: more than all of Temis's 2025 equity-accounted contribution came from the bargain-purchase gain. Without that item, Temis's share in Mey Eden would have been negative by ILS 2.3 million in 2025.
This is the core of the follow-up. Mey Eden's full operating recovery and Temis's recognized contribution in 2025 were not the same thing because Temis only completed the deal on October 23, 2025. Its equity-method line therefore captures only the slice from closing to year-end, and that slice was overlaid with purchase-price-allocation accounting.
In practice, Temis's 2025 line mostly proved that the entry price was lower than the fair value assigned to the assets. It did not yet prove that Temis was already enjoying a full year of recurring earnings from the asset. Anyone looking at Mey Eden's ILS 18.8 million net profit and assuming that half of it already flowed into Temis in the same way is mixing full-year operating economics with post-closing equity accounting.
Management Fees Are Not Noise, They Change Where The Profit Shows Up
Management fees are a good example of a simple-looking number that changes the character of the line. Mey Eden booked ILS 5 million of management-fee expense in 2025. At Temis, in the second half of the year, the main revenue item already came from management fees received from Mey Eden, and the beverage-segment disclosure shows ILS 2.5 million of such revenue.
That does not mean management fees create brand-new profit out of thin air. For Temis, part of Mey Eden's economics is simply routed through a different line: instead of staying entirely inside the equity-accounted result, ILS 2.5 million moves up into parent-company revenue. Management fees therefore improve accessibility and shorten the route upward, but they also blur the comparison between Mey Eden's operating profit and the earnings Temis reports for itself.
The more important point is that the purchase-price-allocation model already treats management fees as a recurring expense, not as outside upside. In the acquisition model, from 2026 onward, management fees are assumed at 2% of revenue. That translates into ILS 11.4 million in 2026, versus only ILS 5 million actually booked in 2025. In other words, the same model that created the bargain gain already assumes that management fees will remain a fixed annual cost inside Mey Eden's economics.
That is a material distinction. It is not coherent to treat management fees as free upside at the Temis layer while ignoring them when evaluating the acquired asset's earning power. The value assigned to Mey Eden already rests on the assumption that it will keep paying them.
The Bargain-Purchase Gain Is A Model Output, Not 2025 Cash Earnings
To understand the quality of the line, it is worth looking at what actually built the bargain-purchase gain. Temis paid ILS 75 million for its share, versus ILS 66.5 million as its share in Mey Eden's book equity. The initial gap was only ILS 8.5 million. The ILS 17.5 million bargain-purchase gain emerged only after that gap was reallocated into fair-value adjustments.
In other words, this gain did not come out of Mey Eden's 2025 income statement. It came from assigning higher values to the acquired brand, land, right-of-use assets, inventory, and deferred tax asset, while also recording a tax provision against those adjustments. The net result of those allocations exceeded the initial gap, which is why negative goodwill was recognized as bargain-purchase gain.
This chart shows how assumption-driven the line really was. ILS 13.6 million was assigned to the brand, ILS 8.1 million to the Katzrin land, ILS 4.6 million to right-of-use assets, and ILS 4.6 million to the deferred tax asset, while ILS 6.4 million of tax provision was recorded against the identified uplifts. Only after all of that did the ILS 17.5 million bargain gain appear.
What is especially interesting in this model is not just what was recognized, but also what was not recognized. The valuer tested customer relationships and still concluded that they had no separate economic value. The reason given was that the cash flow attributable to customer relationships was negligible and even negative, mainly because heavy contributory charges had to be assigned to fixed assets, working capital, and skilled workforce. That is not a minor detail. Mey Eden has about 100 thousand direct jug customers, and most retail sales flow through Tempo, yet the valuation says the center of gravity is not a standalone customer-relationship asset. It is mainly the brand and the owned operating base.
The brand value itself also sits on a defined set of assumptions: 1% royalty rate on revenue, 12-year useful life, and 14.5% discount rate. The acquisition model further assumes a 2026-2030 forecast period, 3% annual growth for 2027-2030, 2.5% terminal growth, and recurring management fees at 2% of revenue. The model was also prepared without IFRS 16, meaning the forecast P&L carries lease expense rather than depreciation on right-of-use assets, and the discount rate was built without lease debt.
None of this is an automatic criticism of the valuation. Some assumptions even look relatively restrained. For example, the model's 2026 revenue forecast is ILS 568.5 million, almost on top of the ILS 565.7 million that Mey Eden actually delivered in 2025. That is not a fantasy jump. But that is exactly the point: the bargain-purchase gain is still a valuation output. Even if the model is reasonable, the line is not cash and it is not recurring 2025 earnings.
Bottom Line
The sharp conclusion has two parts. The acquired business really improved, but the earnings Temis booked from it in 2025 were still not of the same quality. At Mey Eden, the reader sees a genuine operating recovery: higher sales, higher gross profit, higher operating profit, and lower financing pressure. At Temis, the reader still sees a line whose main support is bargain-purchase gain from the purchase-price allocation.
That does not make the deal a bad one. It may well indicate that Temis bought a good asset at an attractive price. But it does require precision. In 2025, the investor still received mostly proof that the entry price was favorable, not full proof that recurring earnings power had already started to flow cleanly through the equity-method line.
That sets the real test for the next 2 to 4 quarters. To improve earnings quality, Temis needs to show that its equity-accounted result from Mey Eden stays positive without bargain-purchase gain, that Mey Eden preserves sound operating profitability even after original-difference amortization and a full management-fee structure, and that the accounting read of 2025 gradually gives way to real recurring earnings.
If that happens, 2025 will look in hindsight like an accounting bridge year on the way to a cleaner operating year. If it does not, 2025 will remain mostly the year in which Temis earned from the acquisition on paper faster than it earned from it in practice.
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