Israel Phoenix Assurance Ltd. (TASE: PHOE1;PHOE5) today notified the Tel Aviv Stock Exchange (TASE) that it was cancelling an agreement to exercise options to acquire shares in Excellence Investments Ltd. (TASE: EXCE) from the investment house's founders Roni Biram and Gil Deutsch.
In a letter to Biram and Deutsch yesterday, Phoenix stated, "In view of the conduct of the sellers during this extended period, in which they acted in bad faith with regard to their commitment to allow for the obtaining of information about Excellence… and after several warnings that we sent to the vendors, Phoenix Investments considers the sellers' conduct to be a fundamental breach of the agreement and a breach of the duty of good faith required by the vendors, and in view of these material breaches, Phoenix Investments hereby notifies the vendors of the cancellation with immediate effect of the agreement with regard to the call options and put options rights."
The Excellence co-founders claim the move is an illegitmate attempt by Phoenix to break up the deal due to its high price.
Phoenix added in its letter, "If and when the authorized court rules against the position of Phoenix Investments that, despite the breaches by the sellers, it has no right to cancel only part of the agreement, then this statement can be regarded as referring to the cancellation of the entire agreement with immediate effect."
Earlier this month, Biram and Deutsch notified Phoenix that, in accordance with the agreement from 2005, they wished to exercise their put option, under which Phoenix will buy their stake in Excellence on the basis of a formula giving it an estimated company value of NIS 1.55 billion, nearly four times the company's current market cap.
Assuming that Excellence's average annual profit in 2008 and 2009 is NIS 90 million, Biram and Deutsch would each get NIS 320 million for their stakes in the company, for a total of NIS 640 million.
Yesterday, Phoenix announced that departing CEO, Yali Sheffi, will receive a retirement grant of NIS 5 million, double the original grant.
Phoenix's share rose 4.4% in morning trading to NIS 4.37, giving a market cap of NIS 649 million. Excellence's share fell 2% to NIS 24.37, giving a market cap of NIS 423 million.
Published by Globes [online], Israel business news - www.globes-online.com - on January 26, 2009
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