IDB Holding Corp.’s shares climbed to the highest in two weeks and bond yields tumbled after a takeover offer valued the debt-strapped company at 1.03 billion shekels ($289 million), more than three times its market value.
The shares jumped 5.9 percent to 5.82 shekels, the highest since Aug. 1, at the close in Tel Aviv. Volume was 5.6 times the three-month daily average. The yield on IDB’s 1.07 billion shekels of 5.1 percent bonds due in December 2020 dropped 62 basis points, or 0.62 percentage point, to 56.55 percent. The benchmark TA-25 Index of equities fell 0.6 percent.
Emblaze Ltd., based in Hertzliya Pituach, Israel, and Tel Aviv-based Netz Group Ltd. are offering 826 million shekels for a 80 percent stake in IDB Holding, according to a Tel Aviv bourse filing today. IDB is struggling to meet payments on about 2 billion shekels in debt and is mired in credit-restructuring talks. Chairman and controlling holder Nochi Dankner has been trying to sell assets and find investors to raise financing.
“The deal may be a solution for IDB and for Dankner to remain within the group,” Avihay Hermon, a trader at Israel Discount Bank Ltd. in Tel Aviv, said by phone today. “It’s still not clear though if the investment will be made as investors have in the past pulled out of offers.”
Last month, Argentine businessman Eduardo Elsztain decided against further investment in IDB. The company’s creditors this week voted in favor of a debt restructuring plan which would divide IDB Holding’s shares among them. A bondholder vote, expected by Aug. 18 on several debt restructuring plans, could give holders control over the company Dankner spent 15 years building.
Under the terms of the proposed deal, Emblaze will be the controlling holder, contributing 743.4 million shekels of the investment in IDB, while Netz Group will inject the remainder. Emblaze said it will fund the majority of its investment through a 500-million shekel shareholder loan. The two partners will set up a new company owned 70.3 percent by Emblaze and Dankner would own the rest. Shares of Netz jumped 6.2 percent to 1.205 shekels.
Dankner turned a family business that made its fortune in table salt and real estate into a sprawling holding company, which includes Israel’s biggest supermarket chain, Shufersal Ltd., and the largest mobile operator, Cellcom Israel Ltd. The combination of unprofitable investments and regulations to boost competition, cut IDB’s market value to 282 million shekels from 5.06 billion shekels at the end of 2010, according to data compiled by Bloomberg.
“Emblaze could take advantage of the chaotic situation at IDB,” said Tsahi Avraham, a managing partner at Reading Capital Ltd., which holds about 1 percent of Emblaze. “If IDB can reach an agreement with bondholders and start with a clean slate, it actually has great assets.”
The newly created company could sell units such as Cellcom and create value that is absent from “the current distressed position,” Avraham said.
Separately, Tel Aviv-based B.G.I Investments 1981 Ltd., controlled by investor Alexander Granovsky, said today that the company paid $25.5 million for a 20 percent stake in Emblaze with an option to increase its holding to as much as 46.6 percent.