Jerusalem Economy Shares Surge as Jordache Owners Buy Stake

Updated on
  • Israeli real estate developer soars most in six years
  • Financial institutions to extend 300 million shekels of loans

Shares in Jerusalem Economy Ltd., a developer of industrial and commercial buildings, surged the most in six years after the company said the Nakash family, owners of jeans maker Jordache Enterprises Inc., acquired the controlling stake.

The shares jumped 22.2 percent, the most since February 2009, to 13.37 shekels at the close of trading in Tel Aviv, compared with a 1 percent gain of the benchmark TA-25 index. The yield on the company’s 5.35 percent bonds maturing Dec. 2017 slumped 521 basis points to 9.75 percent, the lowest level since July 27.

The Nakash family, with partners in an Israel-based investment company, will pay about 350 million shekels ($89 million) for the shares held by Israeli businessman and controlling holder Eliezer Fishman, which were given as collateral to Bank Leumi Le-Israel, according to an e-mailed statement from the group. The investors will hold a 200 million shekels rights offering after the deal’s close and inject those funds back into the company. Leumi shares were little changed.

The Nakash brothers want to become more involved in the local real estate market and the deal “significantly boosts their activity in Israel,” Yarom Ariav, executive chairman of Lavi Capital Ltd. who advised the family, said in an interview at his Tel Aviv office.

Jordache Enterprises won a franchise to operate the port of Eilat, which was privatized in 2013, and bought Israel’s Arkia Israeli Airlines Ltd., a charter flight operator in 2006. The company also owns hotels in Eilat and Jerusalem and is constructing a new hotel in Jaffa, according to the Jordache website.

Earlier, a company controlled by billionaire Beny Steinmetz had been in talks to buy the stake, Jerusalem Economy said in August.

Jerusalem Economy posted a loss of 114 million shekels in the first quarter after gross profit from its unit’s operations in Russia declined 23 percent, according to results filed to the Tel Aviv Stock Exchange. Israel’s ratings company Midroog put the company’s bonds under credit review on Aug. 26, saying it hadn’t managed to sell significant assets in 2015 on which it was relying to meet debt payments.

Financial institutions led by Leumi will loan the company about 300 million shekels, the Nakash family statement said.