The end of IDB’s history has come. Last Thursday, Hagai Brenner, a judge of the Tel Aviv District Court, decided to appoint a joint IDB opener controlled by Eduardo Elstein. This is the second time in the last decade that IDB has reached this point. The previous time, which took place in 2014, was Nochi Dankner who lost control of the company, which eventually came into the hands of Elstein, who had almost 3 billion shekels that had been transferred to her since floating over the sea of debt, most of which he inherited from Dankner. This time, however, the judge’s decision brings the historic IDB to an end, and all that is left of it is Discount Investments. (DSKS) – Formerly a subsidiary and today a sister company.
At the end of 2017, Elstein led a controversial stakeholder deal that blatantly circumvented the Centralization Law, in which a dolphin he owned acquired control of DSKS (70%) from an open IDB, in a deal in which money did not change hands, as the purchase was made through a seller loan Of NIS 1.77 billion, against which bonds were issued. This transaction led to IDB’s artificial separation from its main assets, which are controlled by DKSH – Real Estate Company and Building, which at the time controlled the Gev Yam real estate company; The cellular company Cellcom; And the high-tech holding company Elron. In addition, at the time, DSK also controlled the local retail giant Shufersal, but has since parted ways with these holdings.
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What remains today at IDB, which according to Judge Elstein’s decision will be separated from its control, is a shrunken minority: Israir Airlines, negligible holdings in Clal Insurance, a stake in Modiin Energy and a stake in IDBG, which owns real estate in Las Vegas.
Elstein actually gave up IDB when he refused to inject NIS 70 million into the company, as part of his commitment to inject NIS 210 million in equal shares over three years. From the moment he violated this obligation to the bondholders, he left Judge Brenner no choice. Brenner acceded to the request of the holders of the three bond series, to which IDB owes about NIS 2 billion, appointed Adv. Ofir Naor to liquidate Ei D.B., the attorneys Raanan Clear and Alon Binyamani as temporary receivers of the controlling shares in DSK, and Adi Figel as temporary receiver of Clal Insurance shares. Brenner made the decision even after Elstein agreed to inject NIS 35 million in exchange for three months of contacts with the holders, but they refused from the moment they realized that the judge’s spirit tended toward a joint appointment.
From this moment on, IDB and DSK become multi-faceted battlefields in which a variety of players operate.
Starting this morning (Tuesday), Naor is the publisher and presenter at Open IDB. The lawyer, appointed seven years ago by the same court to investigate the moves made in the company under Dankner’s rule and in order to organize the company’s lawsuits against Dankner, is the one who will dismantle IDB from its assets today, and more importantly – lead the lawsuits against Baal The current control, which he himself was the one who led to his positioning as such.
All IDB executives will be fired immediately, from CEO Aharon Kaufman to the last secretary.
Kaufman, the CEO, also serves as the legal advisor and vice president at DCS. The future of DCS is a more complex issue, and we will get to that later. We will only mention that the offices of the two companies are located on the same floor in the TOHA tower in Tel Aviv, and you have heard that the interests of these two companies collide and conflict.
One thing can already be said – this will be the end of the celebration of inflated expenses in the “management and general” section, which reached NIS 26 million a year, and which are expected to reach NIS 32 million this year – an almost inconceivable amount in a company that is a holding company. Enlightened is the one who is expected to stop the celebration; As well as the employment of the law firms Gross-Hodak and Gornitzky, the consulting firms Giza-Singer-Even and Prometheus, which provided IDB with a variety of valuations; As well as Ronen Tzur’s PR office, and more.
How about Discount Investments stock:
|Strong buy||Purchase||wait on||sale||Strong sale|
In fact, the IDB board of directors has ended its term. Elstein, his controlling partner Saul Zang, and the other directors appointed by Elstein will be forced to resign, and will likely do so on their own initiative, even before the liquidator orders them to do so. During the court hearing, the board of directors presented a position similar to that of Elstein and Dolphin, and argued that another extension should be granted in favor of making the most of the contacts. One director presented a different position.
The company’s executives, headed by Giora Inbar, are in a different position from the other directors and from each other. – Ari Kanterevich and Alina Frenkel – usually took a different position from that of Inbar in the deliberations of the Audit Committee, which consists only of the Foreigners.
The holders of Series I, whose IDB owes NIS 900 million, are the dominant ones in the fight against the company, because they do not hold collateral at all. Leading the holders of this series are the Cypress Radiations, which takes an aggressive line, and Alpha.
To the holders of this series, Elstein offered 35 agorot for each shekel of debt, 241 million shekels in cash and 6% of the shares of DSKS – a proposal that reflects a haircut of hundreds of millions of shekels. Demanding 55 cents for every shekel of debt, it drew the majority of voters after it to oppose the proposal, and in the end it was its position that won.Now the amount that the holders of this series will receive is unknown, In DSK, and an additional amount that will come from various lawsuits and legal proceedings, which are expected to be long and exhausting.
The claims are an essential point. Naor is expected to sue those who have served in various positions over the years at IDB – the directors, directors and controlling shareholders; That is, Elstein and his partner Zang. Calcalist has learned that the lawsuits will focus on selling Shufersal shares at a lower price than their current price; And the saga of selling shares included in parts, without making any real attempt to sell the control in one piece, which could have yielded IDB at least NIS 1 billion more than the sale in parts, which was forced on IDB because Elstein did not receive a control permit from the company The insurance. But the most significant lawsuit is expected to deal with the stakeholder transaction in which IDB sold control of DSK to Elstein’s Dolphin. The major holders of IDB bonds estimate that the resulting damage to the company is more than NIS 1 billion. In other words, the volume of claims is expected to be at least NIS 1-2 billion. It is likely that in the end the saga of claims will end in a lower amount of compensation, if at all, and the compensation also depends on the arrival of the daughters with the IDB insurance companies.
A day before the hearing, Elstein sent a difficult letter to Roni Biram, one of the two owners of the Brosh Foundation. The letter did not refer at all to the other controlling shareholder, Gil Deutsch. In his letter, Elstein argued that Biram’s predators have no limit, and that he and the fund under his control are “far from being the gatekeepers of public funds, like those who bought IDB bonds at floor prices and are trying to make a quick turn without considering the good of society and its creditors.” Financially. “Biram rejected the allegations outright.
An examination of the bondholders reveals that behind the letter are Doron Cohen, CEO of DSKS, and Ronen Tzur, a publicist for Elstein and IDB. The bondholders around argue that this fact will have implications later on.
In contrast to IDB, which is a company that can already be defined as the latter, DSK is alive and kicking. It has more than NIS 2 billion in its coffers, and it is not for nothing that Elstein is fighting to reach an understanding with the holders of Series 14 bonds, to which the company owes NIS 890 million, which hold a lien on its controlling shares.
Unlike a liquidator who sells the company’s assets, a receiver only sells the shares that are in the lien. In other words, Clear and Binyamini should try to sell 70% of DKSH shares at a maximum price. They will focus on trying to get more than NIS 890 million for them – not a simple thing in light of the fact that DKSH is traded at a market value of only NIS 680 million. Its control is worth NIS 475 million.
In fact, Elstein is currently in a situation where he is in talks to regain control of DSK from the holders. In this process, he actually started a month ago. Dolphin’s offer to the holders is NIS 400 million in cash and the balance, NIS 490 million, in the issuance of a new series of bonds. To be finally repaid in 2026, instead of a final repayment in 2022 of Series 14 bonds. The big holders in this series were not provided by Elstein’s offer.
A day before the court hearing, a conversation took place between the institutional entities that have large holdings in bonds of this series – Harel Insurance Company, Phoenix Insurance Company and Psagot Investment House – and a rival philosopher from Giza-Singer-Even, who represents Elstein. Cohen said that the company was well run and that Schalstein was not involved in the management decisions. Holders also noted that Elstein must commit to a higher level of corporate governance, as well as the appointment of a professional property and building CEO in his place.
In the coming days, Elstein is expected to submit to the holders of the 14th series a new offer, which will reach the receiver. The collectors, by the way, are the lawyers of Moti Ben-Moshe, Elstein’s former partner in controlling IDB, who suffered a loss of NIS 550 million when he sold His share to Elstein, and who is currently in arbitration against him due to a difficult dispute.
Elstein’s big problem with his new proposal is that the new bond series, which Dolphin will issue, turns DSKS into a company that is part of a three-tier pyramid – an illegal situation under the Centralization Law. This is a significant difficulty for Elstein, who is expected to limit the validity of his proposal. The conveners will decide whether to put Elstein’s proposal to a vote in the tender for the sale of control of DKSH at all. The number of bidders who will respond to this tender is a question mark. It is not clear at this stage how many sufficient shareholders will be interested in DKSH. If they are interested, it will be possible to hold a competitive procedure that will take several months. If not, the holders of the 14th series will vote regarding Elstein’s proposal.
Opposite Clear and Binyamini, the receivers of DKSH, will stand Naor, the liquidator of IDB Naor will demand to hold an exhaustive tender procedure, in order to obtain a bid higher than NIS 890 million, because any higher amount will be used for reimbursement for Series T holders ‘, Without collateral.
The main difficulty in selling control of DCS is due to it being a public company. This means that a public company will not be able to acquire it, because then a pyramidal structure will be created that is contrary to the law of centralization.
In practice, Elstein has also lost control of DKS, although he may still have some grip on this company. In order to replace the company’s board of directors, a general meeting is needed. The 14th Series bondholders are interested in removing Elstein and his people from DKS ‘board. But until then, they will be content with appointing new directors alongside Elstein and his people, until a general meeting is convened. This fact has great implications for DSK’s subsidiaries. Elstein’s directors lead the subsidiaries’ boards: Cohen at Cellcom, Zang at Properties and Building, Elstein himself at Elron and his brother Alejandro at Gev-Yam. All of these chairs are in danger.
DSK’s management is expected to continue in its role for the time being, but spending tightening will also be there.
If the holders of the 14th series do not want to sell control of DKSH because the bids submitted in the tender will be too low for their liking, they may take a unique course – redemption in kind. As part of such a move, the controlling shares in DSK will be distributed to holders of the 14th series. That is, each holder will receive shares according to his relative share of the debt. One such solution is the nightmare of Series I holders, who will be left with IDB assets only.
The major bondholders in the 14th series include Tzachi Nachmias, the controlling owner of the public real estate company Mega Or. Nachmias and Mega Or hold about 6% of the series. For the sale of Yishpar properties and a building controlled by DSK to Mega Or and Big. Properties and Building is suing Mega Or for NIS 100 million, while the latter is suing the former for breach of agreement.
So far, Nachmias has consistently presented a position that opposed Elstein, including in the last vote in which it was decided to put the debt on immediate repayment. Nahmias is a player who is hard to ignore, and in the fight against Elstein he registers a temporary victory. The legal battle between the two, which has ignited due to Yishparo, is expected to continue, while control of DSKS – of which Properties and Building is a subsidiary – passes to the bondholders. This created the situation where Nachmias is suing a company in which he is a shareholder, and vice versa.
Nachmias himself consistently denies any desire to acquire DSK. Indeed, Mega Or is unable to make this acquisition due to the law of centralization.
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