"In my opinion, relations between Argentina and Israel are very good and cancelation of the soccer match between the national teams doesn't indicate any change whatsoever," IDB Group controlling shareholder Eduardo Elsztain said today at the "Globes" Capital Market conference in Tel Aviv. "It's a great pity that the game was canceled, it was a mistake, but I don't think it means anything about relations between the countries." Elsztain spoke with "Globes" editor-in-chief Naama Sikuler and capital market editor Shai Shalev.
What do you think about the economic situation in Argentina?
Elsztain: "We've had inflation and fluctuations in the currency, the peso, for 30 years already. The weakening of the peso against the dollar and the interest rate hike in the US, combined with the high trade deficit in Argentina, caused the recent economic and currency shock. The 30% drop in the peso is tough, but the economy's competitive standing is becoming stronger."
What is the significance of the crisis in your business in the US?
"Our sales are linked to inflation and the rents in our offices are also linked to the dollar, so we're not concerned about it. We were in a similar state at least five times in recent decades, so we know how to cope with it. I hope that the Argentinian economy is able to emerge from this crisis, too. Our business and real estate will not be particularly affected by the situation. Our three main companies in Argentina recently reduced their leverage."
The IDB group has undergone another upheaval recently, mainly as a result of the slide in Cellcom Israel Ltd.'s (NYSE:CEL; TASE:CEL) share price caused by growing competition in the mobile phone market. The downturn in Cellcom pushed the share price of Discount Investment Corporation Ltd. (TASE:DISI), which holds 42% of Cellcom, down 22% in the first quarter.
IDB Development, which holds a lien on 116.4 million Discount Investment shares with a current market value of NIS 1.2 billion, has seen its Series 9 long-term bonds fall 17% this year in response to events, reflecting a 10% annual yield to maturity.
What have you got to say about what has happened to your bond prices?
"I think that our bondholders can relax. We've invested a lot in business in recent years and we'll continue investing, because the economy here is special and strong. My investment in IDB is a lifelong one; I mean to stay here and I won't leave. I'm very glad that I'm here. I enjoy coming here every month, and every time I come I enjoy it a little more."
Are you thinking about acquiring companies like Bezeq, for example?
"All the companies we acquired have become stronger in recent years. We're businesspeople who examine opportunities from time to time. We've strengthened our companies in the past five years and have achieved a lot. Israel is the most dynamic economy I know. Every time I come here, there are changes and new companies are being created, so I constantly follow developments."
What is happening with your holding in Clal Insurance?
"I don't want to talk about the regulators' behavior here. It's very hard to sell an asset when they don't approve the deals we have proposed over five years. It's not an easy situation for us, but we'll obey the law, of course."
Are you involved in the selection of Clal Insurance's new CEO?
No, we're not allowed to be involved in the process. I hope that the board of directors makes the right decision for the company."
Do you think that the Israeli capital market really knows you?
"We've met all of our commitments, so we were able to get the market's trust and resume raising capital. The Israeli economy and the Israeli capital market are very strong. In our real estate companies, such as Property and Building, we're still developing properties in the center and outlying areas of Israel, such as Beer Sheva. The market here is very strong."
What do you think about the state of the mobile phone market in Israel?
"There's very strong competition here, but Cellcom is the strongest holding in this sector, so I'm not worried about the future. It will get even stronger in the future - I've no doubt about that.
What do you think about the retail market?
"Shufersal is constantly bolstering its sales via its website; it's the leader in Israel in this aspect. The world is unquestionably changing all the time, and Shufersal is investing in development of logistics centers in various places in Israel, such as Modi'in and Haifa, like other companies. We're in an information and communications era; it's necessary to know how to take advantage of that. We're investing in technology. Future shopping centers will focus more on entertainment and less on selling products, but I believe that people will still want to get out of the house and see each other. That won't change. Israel is one of the few places in the world developing goods and services in the forefront of technology. It has a special and important place in the world's future."
Published by Globes [online], Israel business news - www.globes-online.com - on June 6, 2018
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