"It appears that the timing of the IDB-Ganden Tourism deal is problematic, in view of Ganden's current condition and the situation in the tourism market, whose profitability has taken a severe hit from competition and the global economic situation," says Poalim Shahar Ltd. in the first comment by a financial institution on Nochi Dankner and Avi Fisher's party at interest deal. "Globes" has obtained a copy of the opinion.
Nonetheless, if anyone thought that Bank Hapoalim's (TASE: POLI) brokerage unit would launch a rebellion against approval of the acquisition of Ganden Tourism and Aviation Ltd. by IDB Holding Corp. Ltd.s (TASE:IDBH) at IDB's general shareholders meeting next week, they will be disappointed.
Poalim Shahar continues, "On the basis of the rationale of the deal, the acquisition of Ganden Tourism and its merger with Clal Tourism Ltd. should lead to cost savings and operational, organizational, and administrative synergy. This move should create considerable business potential for IDB's tourism activity, so that by the mid-term the acquisition of the activity and additional activity will add value to the company's shareholders."
Poalim Sahar therefore advises institutional investors in IDB to approve the acquisition of Dankner and Fisher's private tourism business, Ganden Tourism. Ganden Tourism owns Israir Airlines and Tourism Ltd. as well as Natour - Travel Agents Association for Organized Tours Ltd., Unitel Tourism and Aviation Ltd., and Yossi Tours Ltd.
Poalim Sahar adds, "IDB's exposure to Ganden Tourism's activity is insubstantial, and the proposed deal has considerable potential upside for IDB."
Poalim Sahar nonetheless cautions that Ganden Tourism needs to streamline and develop online tourism telephone call center services in order to improve the scale of its activity and profit margins after the merger with Clal Tourism. The goal is to create a one-stop-shop of tourism and aviation services by the company.
IDB will pay $1.2 million for Ganden Tourism and will assume the NIS 3.2 million in transaction costs. Nochi Dankner has apparently given new IDB Development CEO Haim Gavrieli the task of persuading the institutional investors to approve the deal. He has already met several institutions to prevent an embarrassing "no" vote.
The possibility cannot be ruled out that the institutional investors will cause just such an embarrassment, despite Poalim Shahar's favorable recommendation. Ganden Tourism's results are quite poor; it lost more than $40 million last year, and it has large shareholders' equity and working capital deficits.
Dankner owns 47% of Ganden Tourism, Fisher owns 33%, the Shmil family owns 15%, and Tsuri Dabush owns 5%. They will likely forego NIS 185.5 million owners' loans to the company as part of the deal. After converting the owners' loans, Ganden Tourism's shareholders' equity deficit will be $32.4 million, and it will have $5 million in cash.
IDB believes that it will have to inject NIS 20 million at most into Ganden Tourism next year. In addition to foregoing the owners' loans, the sellers will be released from their bank guarantees provided for the company, and, if necessary, IDB will provide guarantees for the loans.
Published by Globes [online], Israel business news - www.globes-online.com - on October 8, 2009
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