Delek Group Ltd. (TASE: DLEKG) controlling shareholder Yitzhak Tshuva may be reconsidering the acquisition by Delek insurance group subsidiary Israel Phoenix Assurance (TASE: PHOE1;PHOE5) of control of investment house Excellence Investments Ltd. (TASE: EXCE), following a report last week by "Globes" on the mechanism of the valuation of the stakes held by Excellence's founders, Ron Biram and Gil Deutsch. The two men were to have received a total of NIS 700 million, a sum that reflects a market cap for Excellence of NIS 1.7 billion, four times its current market cap on the Tel Aviv Stock Exchange (TASE).
Yet despite last week's disclosure, sources inform ''Globes'' that Delek and Phoenix are trying to find a way to alter the mechanism, or even scrap it altogether. One alternative that may be considered is a transaction by way of a share swap rather than cash. To this end, Phoenix has appointed a team headed by Adv. Ram Caspi and Adv. Dalia Tal, which will examine all the repercussions arising from the deal. Tal originally represented the previous owners of Phoenix, Israel Kass and Jacob Shachar, when they sold their holdings to Delek in August 2006.
A hint of Delek's dissatisfaction with the move was evident in the announcement released by Phoenix detailing the mechanism for the transaction of the deal. "The company is examining the entire scope of legal and accounting issues arising from the agreement, including issues related to the 'put' option," it said.
A source close to the deal claimed that the agreement to sell Excellence to Phoenix was originally signed three years ago before Yitzhak Tshuva acquired the insurance group, and is based on formulas that are convoluted and complex. "Basing the deal on these formulas created an absurd situation whereby Excellence has been given a value four times that of its current market cap and twice the current market cap of Phoenix," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on November 9, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008