Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) is moving towards its first offering since it became a public company eight years ago. Cellcom yesterday submitted a draft prospectus to the US Securities and Exchange Commission for raising up to $39 million (NIS 150 million) in an issue of new shares to be carried out through an offering of rights to its existing shareholders in both the US and Israel.
No difficulties are expected in completing the offering, after Cellcom controlling shareholder and IDB Development Corporation Ltd. (TASE:IDBD) subsidiary Discount Investment Corporation (TASE: DISI) announced its intention of exercising its option to buy all of the rights to be allotted to it in the offering, and to buy additional rights on the market, which will make its total investment in the offering NIS 100 million, amounting to 67% of the total. This is a far higher proportion than Discount Investment's 42% stake in Cellcom.
Discount Investment is liable to suffer a shortage of cash next year, requiring a capital injection, unless it obtains cash from other sources before then, such as the sale of assets or dividends distributed by subsidiaries, such as Property and Building Ltd. (TASE: PTBL).
"Globes" recently reported that Discount Invesment CFO and acting CEO Michel Dahan had presented the company board of directors with a position paper expressing opposition to an issue of rights, but this was eventually approved with the support of controlling shareholder Eduardo Elsztain, who wished to deliver a message of support for Cellcom to the investment institutions.
At the beginning of the month, Cellcom reported that in order to bolster its balance sheet, its board of directors had ordered that a NIS 120-150 million offering be considered. Cellcom's equity is NIS 1.1 billion, but that is only 17% of its balance sheet total, and the company's debt totaled NIS 2.9 billion, as of the end of the March 2015.
Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2015
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