As IDB Development nears delisting from the stock exchange, the company released details on Monday of the talks on the merger of subsidiary Israir with El Al’s Sun D’or. The new document shows IDB Group will hold 25-30% of the merged company - with El Al holding the rest of the shares - if the deal concludes successfully.
IDB Development fully owns IDB Tourism, which holds all the shares in airline and tour operator Israir; El Al operates vacation packages mainly through subsidiary Sun D’or. The proposed deal would merge Sun D’or into Israir, for which El Al will receive 70-75% of the shares in the latter airline.
Following the merger, Israir will likely be tasked with running low-cost flights, domestic routes, and vacation packages for El Al.
The Monday report from IDB revealed the deal would not include Israir’s major assets and liabilities - specifically its fleet and the loans taken to pay for them. Israir ended the first nine months of 2015 with a net profit of NIS 33 million after posting a loss of NIS 8 million in the corresponding period of 2014.
The Israeli carrier's fleet currently numbers two turboprop ATR-72s used mainly for the Tel Aviv-Eilat route and two Airbus A320 jets for flying from Ben Gurion to Europe and Eilat. This year, the company will accept delivery of two additional A320s it ordered.
The latest report suggests that, if a deal is signed, Israir will sell its planes at an estimated value of $70-85 million before it is concluded. The deal could include the sale and lease-back of the planes - or some of the planes.
Talks continue with Leumi
IDB Tourism and Israir are both run by CEO Uri Sirkis. The Monday announcement also revealed the two companies are in advanced talks with Bank Leumi over the terms of up to $50 million debt.
According to a draft agreement, IDB Tourism and Israir will seek a $15 million loan from Leumi in 2016 while the balance will be borowed from 2017 onwards.
Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2016
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