Discount Investment Corporation (TASE: DISI), controlled by Eduardo Elsztain, last night completed the sale of its 26% controlling stake in Israeli retail supermarket chain Shufersal Ltd. (TASE:SAE) for NIS 1.5 billion. The sale increases Discount Investment's cash reserves to more than NIS 2 billion.
Most of the buyers were institutional investors with the Altshuler Shaham investment house buying NIS 500 million worth of shares and most of Israel's largest insurance companies buying NIS 100 - 200 million each.
The sale has been completed after protracted work led by Shufersal chairman Elsztain and with the assistance of Deloitte. After the sale Discount Investment is left with two large holdings - Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Property and Building Ltd. (TASE: PTBL) as well as control of Mehadrin Tnuport Export LP (TASE:MEDH) and Elron Electronic Industries Ltd. (TASE: ELRN).
Discount Investment had attempted to sell its Shufersal stake at the start of the coronavirus crisis in exchange for buying bank its own bond at a price that reflected a discount on the value of its commitments but there was no major demand from the company's bondholders and the deal was not implemented.
Discount Investment needs the cash to service its debt and the sale will serve t reduce leverage by repaying debts to bondholders, and it may also be used for dividend payments for Property & Building or to be more of its shares.
Leumi Partners senior financial analyst Maayan Beck said, "The sale of the holdings in Shufersal stems only from the cash problems of IDB Group (Discount Investment's parent company) and it is reasonable to assume that it was carried out at a price lower than the market today."
Beck believes that investment in Shufersal at such a price is attractive due to the quality of the company and removing the cloud of Discount Investment's attempts to sell shares. "We remain with an Outperform recommendation on the share and a target price of NIS 27 per share, reflecting an upside of 10% on the current market price. In our estimation, the move leaves an opening for the formation of a controlling core through institutional acquisitions on the stock marklet."
Published by Globes, Israel business news - en.globes.co.il - on July 23, 2020
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