Eyal Lapidot threatens to sue IDB over Clal Insurance deal

Eyal Lapidot
Eyal Lapidot

Lapidot is insisting that the agreement to sell him 4.99% of Clal Insurance and provide him with a NIS 118 million seller's loan must be honored in full.

Eyal Lapidot is threatening to sue IDB Development Corporation unless it completes the agreement that it signed with him to sell him 4.99% of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) for NIS 132 million. Under the agreement, Lapidot was due to pay only NIS 14 million in cash, with the remaining NIS 118 million being paid through a NIS 118 million five-year seller's loan from IDB Development.

The deal was due to be completed by Sunday, but IDB Development chose not to complete it after Lapidot refused amendments to the sale agreement that the company propose. In response, Lapidot wrote to IDB Development and its directors yesterday via his lawyers alleging the company was in breach of the agreement and demanding that it should immediately take every action necessary to complete it. The letter states that Lapidot will use every means at his disposal to enforce the agreement, and to obtain compensation from the company and its directors for any damage of loss caused to him.

For its part, IDB Development said in a notice to the Tel Aviv Stock Exchange that it continued to make arrangements to complete the agreement. In the past few weeks, IDB Development, controlled by Eduardo Elsztain, has sought a financial body that will step into its shoes and provide the loan to Lapidot, but the terms of the loan, whereby the lender will have only a negative lien on the shares sold and not a full and first lien as is customary in such transactions, makes it hard to find one.

On June 17, it was reported to the Tel Aviv Stock Exchange that Lapidot had exercised the option given to him by IDB Development to buy 5% of Clal Insurance from it. The option was awarded following two other deals in which Mori Arkin and Yakir Gabay each bought 5% of Clal Insurance for NIS 132 million, at NIS 47.70 per share. In addition, one of the pair (apparently Arkin) was given an option to increase his stake in the insurance company by a further 3% at NIS 50 per share within 120 days, subject to approval of the Commissioner of Capital Markets, Insurance and Savings.

A source familiar with the matter told "Globes" that when the triple deal in Clal Insurance shares was originally made with Arkin and Gabay, it was proposed that Lapidot should pay for his shares from other sources, and that it was Elsztain who offered to give Lapidot the finance himself, through IDB Development. The source added that the matter could turn out to be improper conduct in relation to securities, because Elsztain may have caused investors to believe that Clal Insurance was about to receive an investor who was an expert in the insurance industry and who could contribute to the company, causing Clal Insurance's share price to rise, but now, because of a decision by Elsztain himself, the deal is not going ahead.

By the same token, Elsztain did not have a different picture of his position and that of IDB Development two months ago, when he made the commitment to Lapidot, from the one he has now. Therefore, as far as Lapidot is concerned, Elsztain and IDB Development's conduct is questionable, and could even be construed as selective insolvency or creditor preference, in that only the company's commitment to Lapidot is not being honored. The source said that the matter was liable to end up in court.

Published by Globes, Israel business news - en.globes.co.il - on July 30, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Eyal Lapidot
Eyal Lapidot
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