The proceeds will go to the banks: Arbel will pay 450 m NIS against half of Delek Israel


Following a campaign to increase liquidity and reduce leverage, the Delek Group signed a binding agreement with the Arbel Fund on the eve of the holiday, led by Amir Hessel and Gabi Lev, for an investment of NIS 450 million in cash in the subsidiary Delek Israel.

In return, the fund will receive ordinary shares (20% of the capital) and preference shares (29.9% of the capital), which together constitute 49.9% of the share capital of Delek Israel, which operates in the field of gas stations and convenience stores. The parties intend to carry out a series of actions to improve Delek Israel in preparation for an IPO on the Tel Aviv Stock Exchange. This removed a move that tried to lead Lahav El R. and Rami Levy to acquire control of Delek Israel.

Following the transaction with the Arbel Fund, Yitzhak Tshuva’s Delek Group will continue to hold 50.1% of Delek Israel’s shares. At the end of a five-year investment period, and under the assumption that Delek will redeem the preference shares granted to the Arbel Fund, in accordance with the agreement, it will increase its share to 80% of Delek Israel, and the Arbel Fund will be left with approximately 20% of the share capital (ordinary shares). The final date for receiving the necessary approvals from third parties to complete the transaction is set for October 15.

Group stock fuel It rose by 9% following the report on the deal with Delek Israel, but since the beginning of the year it has fallen by 87%, and it reflects a company value of only NIS 1 billion – in view of the huge debts (about NIS 6 billion) to bondholders. Fuel is currently traded at 30% -90% junk yields.

The agreement stipulates that if all the required approvals are received by the set dates for the completion of the transaction, except for the completion of the power plant transaction (signed by Delek Israel with Rafek Energy for NIS 367 million, and its completion is expected in the coming weeks) Of the Arbel Fund will be transferred to the trustee for the purpose of making an early repayment of the balance of the debt to the banks in the amount of NIS 340 million. The balance will be held in trust until the completion of the power plant transaction and will be transferred upon completion of the payment at the expense of the debt of DKL (a subsidiary of the Delek Group that holds a chain of Ithaca shares) to a foreign bank.

Management rights will pass to the general partner

Delek Israel is one of the four largest companies in Israel in the field of gas stations and convenience stores (through the “Mint” chain of stores). As of the end of June, Delek Israel has 238 public gas stations (of which 179 are operated by Delek Israel) and 195 convenience stores (of which 161 are operated by Delek Israel and the rest by franchises).

The management rights in Delek Israel during the investment period will be transferred to the General Partner (GP) of the Arbel Fund, who will manage the company through the directors, when the agreement regulates specific issues in which Delek Group representatives on the Delek Israel board will have a veto. Arbel will hold the right to appoint four directors to Delek Israel, and Delek will appoint two directors on its behalf to the board.

During the investment period, the fund will enjoy an annual return of 10%, which will be received from dividends amounting to NIS 45 million per year, which will be distributed from Delek Israel’s current activities to the preferred shareholders. To the extent that it will not be possible to distribute the premiere dividend during certain years of the investment period, the agreement sets out mechanisms and conditions for its accumulation at the end of the investment period.

The fund’s investment is made on a “non-recourse” condition where the right of return is for Delek Israel shares only. The value of the shares that will remain in the hands of the fund at the end of the investment period, with a minimum amount of 20%, subject to adjustments, should complete the fund’s annual return during the investment period to 15%.

Arbel is a private equity and sophisticated debt fund that focuses on financing medium-sized private Israeli companies and financing projects and assets. The fund’s assets exceed NIS 1 billion. The fund was established by Basket and Lev about three years ago. The basket previously served as the chief investment officer of the Harel Insurance Group, while Lev was one of the heads of the KCPS crane fund.

Idan Wells, CEO of Delek Group, said that “Completion of the transaction is an important milestone in improving the company’s financial strength and implementation of its strategy.

“The current deal joins a series of realizations made by the Group in recent months on an unprecedented scale, proving once again that even in a period of market instability, the Group knows how to complete important and complex business moves, according to deadlines and targets, and we intend to continue working diligently “, Wells said.

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