The arbitration for control of IDB Development Corporation Ltd. (TASE:IDBD) has been decided. Judge (ret.) Amiram Benyamini, the arbitrator in the dispute between Eduardo Elsztain and Moti Ben-Moshe, Elsztain's former partner, ruled that Elzstain would acquire Ben-Moshe's shares for NIS 150 million, thereby becoming the sole controlling shareholder in the company. At the same time, the arbitrator accepted Ben-Moshe's condition for the buy me buy you (BMBY) procedure: that Elzstain's consent to buy all of Ben-Moshe's shares constitutes consent to assume all of Ben-Moshe's NIS 256 million obligation to the trustees of the IDB Holdings debt arrangement. The trustees also represent the rights of the minority IDB Development shareholers.
In May 2014, Elsztain and Ben-Moshe became the controlling shareholders in IDB Development, after being granted control of the company by a court in the framework of the debt arrangement for IDB Holdings, that company's former parent company. Up until early 2015, Elsztain and Ben-Moshe held equal stakes in IDB Development. The partnership broke up in February, however, and Elsztain became the leading shareholder after injecting NIS 392 million in the framework of an issue of rights, in which Ben-Moshe chose not to participate.
In his response, Ben-Moshe alleged that Elsztain's actions had contravened the partnership agreement between them, and demanded the appointment of an arbitrator to rule on the transfer of control to him. Elsztain continued to increase his holdings by exercising share options, and as of now owns 68% of IDB Development, while Ben-Moshe has been diluted to only 14%.
During this period, Elsztain also managed to dismiss Ben-Moshe from the joint chairmanship of IDB Development and from the board of directors of its subsidiary, Discount Investment Corporation (TASE: DISI). In response, Ben-Moshe exercised the BMBY mechanism in the controlling shareholders agreement, offering to buy all of his partner's shares at NIS 1.64 a share (compared with the NIS 2.10 current market price). He also demanded that the BMBY process include an undertaking by the buyer to assume the seller's obligations with respect to a NIS 512 million offer to purchase for the minority shares in IDB Development.
Elsztain opposed this demand, and the arbitrator went on to deal with the question of which of the two would acquire his estranged partner's shares, and whether the purchase would also include the partner's obligations concerning the offer to purchase.
In early July, the arbitrator wrote that his ruling would be expected to fall in August, but it was eventually published only today.
Published by Globes [online], Israel business news - www.globes-online.com - on September 24, 2015
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