Alexander Granovsky and Nochi Dankner have reached a deal for the control of IDB Holding Corp. Ltd. (TASE:IDBH). Granovsky, a Ukranian-Jewish investor, is taking over Emblaze Ltd. (LSE: BLZ) through BGI Investments (1961) Ltd. (TASE: BGI), and using Emblaze's NIS 500 million cash reserves to acquire control of IDB through a capital injection of NIS 826 million, according to a notice to the Tel Aviv Stock Exchange (TASE) by the companies on Wednesday evening.
Emblaze will invest NIS 826 million to acquire 80% of IDB, provided that "IDB has no liabilities to its financial creditors." In other words, the capital will be injected after IDB reaches a debt settlement.
Dankner also petitioned the Tel Aviv District Court to postpone the preliminary creditors' meetings scheduled for Sunday, at which IDB Holding's bondholders will decide on their preferred debt settlement proposal. Today, IDB also notified the TASE that "the conditions have been met" for the sale of the company's executive jet for $9.5 million.
On Wednesday evening, BGI notified the TASE about the proposal for the acquisition of 20% of Emblaze from chairman Naftali Shani and Fortissimo Capital, which if carried out, could give BGI a controlling stake of 46.6% of the company. At the same time, BGI's bondholders are demanding immediate repayment of its bond.
But BGI faces several large hurdles, which make the deal with Dankner unlikely to go ahead. The first is BGI's bondholders, who have summoned a meeting for Monday. The bondholders, headed by Lapidoth Israel Oil Prospectors Corporation Ltd. (TASE: LAPD) controlling shareholder Jacob Luxenburg, are owed NIS 120 million, which amounts to more than half of BGI's cash.
BGI's bondholders oppose the company's plan to invest in IDB, which Luxenburg calls "illogical" and "dangerous." On Wednesday, he wrote to BGI's board of directors, demanding that the company explain how it will service its bond debt. The bondholders are due to receive payment of one-third of the principle at the end of March 2014.
The acquisition of IDB will be carried out through Emblaze and Netz Group Ltd. (TASE:NETZ), which will inject NIS 82.6 million for 10% of the company. Most of the capital injection in IDB Holding will go to IDB Development Corporation at a company valuation "before money" of NIS 944 million. Part of the proceeds will be used to pay IDB Holding's creditors, in addition to the company's cash reserves of NIS 150 million. IDB Holding's creditors will receive 50% of IDB Development and cash.
Dankner will receive 30% of the new company that will be established, and Emblaze will own 70.3%. The new company will own 72.% of IDB after the deal, Netz will own 8%, and current shareholders will own 20%. This will add two levels to IDB's pyramid, creating a "super-pyramid" of 7-8 levels.
Published by Globes [online], Israel business news - www.globes-online.com - on August 15, 2013
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