The shares of Clal Industries increased 4.6 percent, the most since March 18, to 11.96 shekels at 2:54 p.m in Tel Aviv. IDB Holding Corp. (IDBH) gained as much as 18 percent, and was trading 0.1 percent higher. The yield on IDB Holding’s 5.1 percent bond due December 2020 fell for the first time in more than a week, dropping 200 basis points, or 2 percentage points, to 34.97 percent. The TA-25 benchmark index dropped 1.2 percent.
IDB Development Corp. signed an accord to sell 49.9 percent of Clal Industries in an all-cash transaction that values the company at 2.55 billion shekels to Access Industries Holdings Inc.
“This is a great deal for all sides concerned,” said Zach Herzog, head of international sales at Psagot Investment House Ltd. in Tel Aviv said by phone today. “It is a breath of air for IDB and the buyer is buying a quality asset.”
Last week Standard & Poor’s Maalot cut its ratings on IDB Holding and IDB Development Corp. to the lowest and third-lowest investment grades, respectively, citing “weak” funding levels. IDB Holding shares plunged 21 percent last week, also as shares of Cellcom Israel Ltd. (CEL), a unit of Discount Investment Corp. (DISI), dropped 27 percent amid growing competition in the wireless market.
“The purchase price of Clal represents a 41.7 percent premium to the current price of the shares and a 15.6 percent premium based on a three month average closing prices for the shares,” IDB Development said in a PR Newswire statement today.
“The price is a premium to the current market value of Clal but well below the historic value of the company,” Herzog said. At the end of 2005 the market value of Clal was 3.8 billion shekels.
Israeli billionaire Nochi Dankner, who controls IDB Holding, Discount Investment and several other companies, said he will honor all his debts to investors and is not considering the option of asking them to accept a so-called “haircut” debt arrangement, in an interview broadcast last night on Channel 2 news. In the interview Dankner said he would be willing to sell some of the companies under his control provided the offer was sufficiently attractive.
“The deal gives Dankner cash he desperately needs to pay off his bondholders and injects some calm into the market around both equities and bonds,” Herzog said. He added that IDB Holding’s Clal Insurance Enterprise Holdings Ltd. (CLIS) is probably the company to be sold next, in light of the expected law requiring the simplification of corporate structures in Israel.
The Israeli cabinet on April 22 approved the recommendations of the committee on economic concentration that includes limiting pyramid structures to three public layers and also also include reducing cross-holdings in financial and industrial businesses. The cabinet appointed its own committee to prepare the legislation necessary to implement the recommendations.
Discount Investment Corp., in which IDB Development has a 73.64 percent stake, dropped 3.1 percent to 8.625 shekels, the lowest level since Jan. 1995.
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