Sources inform ''Globes'' that Israel Infrastructure Fund (IIF), controlled by Harel Insurance Investments and Financial Services Ltd. (TASE: HARL, is in talks to acquire stakes in Road 6 (Cross-Israel Highway or Yitzhak Rabin Highway) franchisee Derech Eretz Highways Ltd. IIF is talks for the 25% stake in the company held by Canada's Aecon Construction Group Inc. (TSX: ARE) and the 37.5% stake held by Africa-Israel Investments Ltd. (TASE:AFIL), although the latter talks are only in the initial stage with no understandings of any kind yet.
The company value for Derech Eretz under discussion is not known at this time, but it is clear that the value will considerable if deals are struck. Earlier this year, when Africa-Israel was reportedly in talks to sell its stake in the franchisee for NIS 300-400 million, giving Derech Eretz a company value of up to NIS 930 million.
Africa-Israel said in response today, "There's nothing for us to report; when we have something to report, we'll announce it."
In 1998, Derech Eretz won the BOT to build Road 6 and operate it for 30 years. Earlier this year, the government notified the company that it plans to sell its warrants for 49% of the company, reportedly for NIS 500-600 million, a value that underscores the company's value. Exercising the warrants will halve the holdings of Derech Eretz's shareholders, Aecon, Africa-Israel, and Shikun u'Binui Holdings Ltd. (TASE: SKBN). The warrants are linked to the Consumer Price Index (CPI) plus 8%, giving them a current value of NIS 200 million.
IIF owns stakes in Jerusalem light rail franchisee CityPass, and wants to increase the holding. It also owns stake in Egypt's East Mediterranean Gas Company (EMG). IIF plans to raise hundreds of millions of shekels in a few months.
Published by Globes [online], Israel business news - www.globes-online.com - on July 12, 2010
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