Sources inform “Globes” that Middle East Tube (TASE:TUBE) (METCO) is postponing its financing round. The Israel Securities Authority investigation of METCO shareholders caused predictions in recent days that the issue would be postponed. The delay was decided after consultations with the issue managers: Hapoalim Israel Brokerage and Investments (IBI), Menorah Gaon, and Tamir Fishman. As a result of the postponement, the issue will be based on the second quarter report, instead of the first quarter report.
METCO, controlled by the 3i (Investment In Industry) fund (42.9%) and Gaon Agro Industries (TASE:GAT) (38.1%), announced a month ago that it was planning to issue NIS 60 million in convertible bonds and NIS 20 million worth of options. METCO president and acting CEO and 3i managing director Esther Eldan said at the time, “The aim of the issue is to allocate funds for future investments in projects, such as the natural gas project, setting up a desalination facility, and Plassim Technical Plastics Works for Agriculture, Industry and Building, as well as other investments related to the company’s current business. The money will also be used to reduce the company’s bank debt.”
Last week, however, the Securities Authority investigation of Middle East Tube shareholders Ian Nigel Davis and Aviv Algor on suspicion of fraud, false registration in corporate documents, and including misleading information in reports and in a draft prospectus changed the picture. The two are suspected of claiming in a presentation that a company shareholders meeting had legally approved transactions with the controlling shareholders, in which the controlling shareholders had a personal interest.
The Securities Authority asserts that in effect, the number of the shareholders who voted to approve the transaction had not met the legal requirements. Under the Companies Law, an exceptional transaction by a public company with a controlling shareholder requires approval by a shareholders meeting, among other things. The majority must include at least a third of the votes of shareholders in attendance with no personal interest in approving the deal.
At the advice of one of the underwriters, Middle East Tube decided to postpone the issue until the situation of the controlling shareholders is clarified. The company and its underwriters believe the affair will not affect operations, but the company prefers to wait until the dust settles before raising money on the capital market.
Published by Globes [online] - www.globes.co.il - on August 21, 2003