Teddy Sagi bids for 12% Delek Drilling stake

Teddy Sagi / Photo: Jonathan Bloom , Globes
Teddy Sagi / Photo: Jonathan Bloom , Globes

Sagi's offer is 10% higher than the price agreed by Citibank with the Dayan family.

Israeli billionaire Teddy Sagi sees an investment opportunity in Delek Drilling LP (TASE: DEDR.L), which holds major stakes in the Tamar and Leviathan natural gas fields. A company owned by Sagi is offering to buy the Delek Drilling participation units attached in favor of Citibank at a 10% premium on the price agreed by the bank with the Dayan family, according to a binding offer sent to Citibank by Sagi's Globe Invest company.

It was reported yesterday that Citibank had contracted an agreement to sell 12% of the participation units in Delek Drilling to a family company, whose beneficiaries are the Dayan family, for $57 million (NIS 220 million). The participation units, which belong to Delek Group subsidiary Delek Energy, were attached in favor of Citibank to secure a loan, the outstanding balance of which is $57 million.

The amount offered by the Dayan family, which operates in real estate, hotels, and the auto sector in Israel and elsewhere, is 55% less than the participation units' market value, which reached NIS 485 million during the course of today's trading on the Tel Aviv Stock Market (TASE). Sagi, whose business lies mainly in technology and real estate, offered $62.7 million today for the Delek Drilling participation units.

The letter containing the offer sent to Citibank and the Tel Aviv District Court states, "These proceeds will be delivered in cash against receiving the participation units and court approval for the sale. They are not subject to any bank financing, due diligence, or any other examinations whatsoever, and will be delivered within two business days, or to any other party, as instructed by the bank. If a pricing procedure or a sale through any other method is conducted, the company wishes to take part in any such procedure."

On Sunday, Tel Aviv District Court president Judge Eitan Orenstein granted the petition by Delek Group for a temporary restraining order against completion of Citibank's deal with the Dayan family. In its announcement to the TASE, Delek Group said that Delek Energy "strongly opposes the validity and legality of the deal, and will continue to use all means at its disposal to make sure that it is rendered void ab initio, as written in the original report."

Delek Drilling down 61% this year

The price of Delek Drilling's participation units has plummeted 61% this year in response to the global outbreak of the coronavirus and the ensuing steep fall in oil and natural gas prices. These price falls have driven the market cap of Delek Drilling down to NIS 4 billion.

Following the precipitous drop in the value of the attached securities, Citibank sought to sell them in order to obtain the outstanding balance of its loan, which is due for repayment only next year. Delek Group holds 59% of the participation units in Delek Drilling, with a current market value of NIS 2.37 billion.

Delek Group says that it will suffer unimaginable damage if Citi sells the participation units at the current very low prices. "This does not refer merely to the direct damage resulting from the sale of collateral at a temporary low point, but also to a chain reaction liable to cause huge damage to Delek Group's shareholders and creditors," the petition for the restraining order states.

Delek Group reported today, "Tel Aviv District Court Judge Iris Lushi-Abudi scheduled a hearing for March 26 on the petition for a temporary restraining order. The temporary restraining order issued against the foreign bank on March 15 at the company's request enjoins the bank from selling the participation units in Delek Drilling Limited Partnership used to secure the loan it granted remains in effect until ruled otherwise."

Published by Globes, Israel business news - en.globes.co.il - on March 17, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Teddy Sagi / Photo: Jonathan Bloom , Globes
Teddy Sagi / Photo: Jonathan Bloom , Globes
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