Israel Phoenix Assurance Ltd. (TASE: PHOE1;PHOE5) today confirmed yesterday's report by "Globes" that significant progress has been made in negotiations with the co-founders and controlling shareholders of Excellence Investments Ltd. (TASE: EXCE), Gil Deutsch and Roni Biram, toward a settlement on Phoenix's purchase of their holdings in Excellence for at least NIS 620 million. There is an option under which Biram and Deutsch could receive even more.
The understandings are not yet binding. They were achieved against the backdrop of the recovery in the capital market, and the surge in Excellence's share price in recent months.
Phoenix said that the parties have agreed on the structure in principle of a deal. In the first stage, Phoenix will acquire half of Biram and Deutsch's combined 40.88% stake in Excellence -20.44% - for NIS 340 million in cash. This acquisition will give Phoenix a controlling interest in Excellence.
Phoenix can acquire the other half of Biram and Deutsch's stake in Excellence in four identical installments of 5.11% each over four years at a floor payment of NIS 70 million per installment. The total payment for the four installments could rise depending on Excellence's results.
The parties will calculate the value of the four installments on the basis of their original agreement - 12 times Excellence's average annual profit in 2008 and 2009, after adjustments. If Excellence achieves high profits, Biram and Deutsch will see an upside for each installment above the minimum price promised by Phoenix. If Excellence achieves high profits, Phoenix could pay as much as NIS 700 million altogether for Biram and Deutsch's shares.
The new deal now being hammered out includes no payment in Phoenix shares.
The negotiations are still ongoing, and there is no guarantee that a deal will be closed. Meanwhile, both companies are still readying legal proceedings.
Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG) controls Phoenix through Delek Capital Ltd. and Delek Investments and Properties Ltd. Phoenix's share rose 2.8% in morning trading to NIS 7.32. Excellence was unchanged at NIS 47.96. Delek Group's share rose 0.9% to NIS 438.
Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2009
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