The IDB chairman has been threatened with a derivative action unless he sues the directors who approved Discount Investment Corporation's' investment in the troubled newspaper. Nochi Dankner is in further trouble over the investment by IDB Holding Corp. Ltd. (TASE:IDBH), which he controls, in Ma'ariv Holdings Ltd. (TASE: MARV-M). IDB unit Discount Investment Corporation (TASE: DISI) reported this week that it had received a letter on behalf of its shareholders demanding that it should sue its board of directors over its investment in troubled Hebrew daily Ma'ariv. Today, a letter was sent to Dankner himself, in his role as chairman of Discount Investment, from the office of Adv. Ronen Adini, preliminary to the filing of a derivative action, in which Adini demands of Dankner that the company "should prosecute its rights by filing suit over the matter of the investment in Ma'ariv." Adini points out that, since the time the investment was made on June 2 last year, Discount Investment has lost NIS 89 million on Ma'ariv.
Adini adds that the investment is a material one for a company with a market cap of just NIS 400 million, and that the Discount Investment board ignored warnings from rating agencies dating from before the investment concerning its liquidity position. Adini alleges that the Discount Investment board and its senior officers were in breach of their duty of care to the company and its shareholders and caused them damage.
Discount Investment bought control of Ma'ariv more than a year ago from Zaki Rakib and Ofer Nimrodi, and so far has invested more than NIS 300 million in buying the controlling stake, buying Ma'ariv bonds, and extending loans to the newspaper.
In the first quarter, Ma'ariv lost NIS 36.6 million, following a loss of NIS 96.4 million in 2011. Its financials for the first quarter of 2012 had a going concern warning appended to them because of the company's cash flow deficit. Since the beginning of 2011, Ma'ariv has had negative cash flow of some NIS 170 million.
Published by Globes [online], Israel business news - www.globes-online.com - on July 26, 2012
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