Sources inform ''Globes'' that that brothers Avi, Joseph, and Ralph Nakash have acquired the controlling interest in Arkia Airlines from its employees, in a deal worth an estimated $10 million. Following the deal, the Nakash brothers will own 65% of Arkia, and its employees the rest.
Arkia’s employees recently acquired 75% of the airline for $12 million. Under the deal, they acquired the airline’s planes (except leased planes) and routes: two Boeing 757-300s, Boeing 757-200, four ATR 72-500s, and four Dash-7s; and its domestic routes and charter flights.
Arkia’s domestic routes are Rosh Pina-Haifa, Sde Dov-Eilat; Ben Gurion-Eilat, routes to Israel Air Force bases, and civilian transfers to the Uvda Air Force Base. Arkia’s regional destinations are Sharm el-Sheikh in Sinai, Amman, Jordan, Larnaca and Paphos in Cyprus, and periodic flights to Turkey and the Greek islands. Arkia has 23 other international destinations.
Arkia’s employees also acquired the airline’s tourism activities, but Arkia captain and director Amir Erez said that this was a sideline, and that, “We’re interested in the aviation business.”
Antitrust Authority director for employee deals Adv. Peter Gad Naschitz will oversee implementation of today’s deal between Arkia’s workers committee and the Nakash brothers. The Nakash group acquired Arkia’s domestic and international aviation activities. The Nakash group today exercised a commitment given to the Arkia workers committee a year ago to acquire the controlling interest in the airline.
Avi Nakash said the acquisition of Arkia was another step in the group’s strategy to invest in Israel, and that it was a vote of confidence in the future of Israel’s tourism industry. He added that the group wanted to acquire full control of the plane leasing businesses from the Borovich brothers.
Erez said, “Arkia’s employees did not buy the airline in order to make a capital gain or take control, but in order to choose our partners. From the 30 groups that approached us, we chose the one that wasn’t seeking a quick exit, and had economic stamina, responsibility, and chemistry with the workers.”
The sale of Knafaim-Arkia Holdings Ltd.s’ (TASE:KNFM) aviation business has not yet been completed. The deal is subject to a number of conditions, including the consent of Arkia’s creditor banks and approval of various regulators. Another major hurdle is separating Arkia’s aviation business from its other, much more profitable plane leasing operations.
The Nakash group believes that Knafaim does not want sell its plane leasing business because this will involve paying tens of millions of shekels in taxes, which the company’s controlling shareholders, the Borovich family, wants to avoid, due to the collapse of Clubmarket Marketing Chains Ltd. and the consequent probable difficulty in raising money from the banks.
Gad Tepper CPA, who represents the Nakash group, said, “The Borovich family probably has no choice but to offer Knafaim’s leasing business for sale. Under certain conditions, our group will be prepared to buy all of Arkia’s operations.”
$55 million of Arkia’s $80 million in shareholders’ equity is derived from its plane leasing business, and only $25 million from its aviation business. This suggests that the leasing business could generate $40-50 million in a quick sale.
The Antitrust Authority ordered Knafaim to sell Arkia’s aviation business when it took over El Al Israel Airlines (TASE:ELAL).
Published by Globes [online], Israel business news - www.globes.co.il - on July 17, 2005