Discount Investment shareholders sue Dankner over Ma'ariv acquisition

The claimants contend that there was no business logic to the Ma'ariv investment, because it is a failing company by every measure.

Discount Investment Corporation (TASE: DISI) shareholders today filed a suit against the company, its directors, and officers with the Tel Aviv District Court's Economics Department, claiming that its investment in Ma'ariv Holdings Ltd. (TASE: MARV-M), the owner of Hebrew daily "Ma'ariv" has cost its NIS 370 million. Nochi Dankner is chairman of both IDB Holding Corp. Ltd. (TASE:IDBH) and its subsidiary Discount Investment.

The claimants contend that Discount Investment's decision to acquire the controlling interest in Ma'ariv Holdings in early 2011 for NIS 147 million, and its subsequent decisions to inject an additional NIS 200 million into the company, as well as giving Bank Hapoalim (TASE: POLI) a NIS 24 million guarantee, were negligent and unreasonable decisions, which harmed the company and its shareholders.

The claimants contend that there is no business logic to the Ma'ariv investment, because it is a failing company by every measure, which has consistently lost money for years. The claimants say that these facts were known to Discount Investment's directors and its controlling shareholder when they made the decisions, and that these decisions were unclear at the time given that the deal was financially unreasonable, illogical in term of business, was not in the company's interest or serve its aims as there was no synergy with its business, and was liable to cause the company severe harm.

The claimants contend that the directors' negligence is reflected by their approval of the investments in Ma'ariv, without presented to shareholders (on the basis of information on the TASE website), prior to approving the deal, any valuations or reasonable and serious business plans that analyzed Ma'ariv's value or clarified how Discount Investment would profit from the deal.

The claimants appended an opinion by economic Dr. Meir Amir, who says that the investments in Ma'ariv by Discount Investment were made despite a 60% drop in its value during 2011 alone and while the yields on four of its six bonds rose to junk bond status of over 8%. He said that Discount Investment lost NIS 1.4 billion in 2011 and its debts totaled NIS 4.8 billion. At the time of the investment in Ma'ariv, it was clear that the company was in dire straits, with a shareholders' equity deficit of NIS 31 million, and NIS 800 million in accumulated losses since 2000.

Discount Investment declined to comment on the report.

Published by Globes [online], Israel business news - www.globes-online.com - on September 4, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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