Haim Saban set to relinquish control of Partner

Haim Saban

Saban has lost over NIS 600 million on paper on his investment in Partner.

Haim Saban has reached the moment of truth, when he must decide whether to return shares in Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) to Hong Kong company Hutchison Telecommunications International as the January 2020 date for repayment of a NIS 1.1 billion loan approaches.

As "Globes" reported last week, there is no economic reason for Saban to repay the loan he received from Hutchison in the Partner acquisition, and he will therefore prefer to return the shares. "Globes" also revealed that Hutchison is considering holding an auction to sell the shares, and has no intention of returning to Partner and the local telecommunications market.

The value of Saban's shares in Partner is NIS 750 million, which means that he has lost over NIS 600 million on his investment on paper. "Globes" reported a number of times in recent months that Saban was negotiating a change in the loan terms with Hutchison. Saban twice postponed payment of interest in coordination with Hutchison, showing that he planned to dispose of Partner, rather than repaying the loan.

It was learned last week that Saban had reached agreement with the bondholders of Scailex, the former controlling shareholder in Partner, and had agreed to buy their option to receive a NIS 115 million dividend for only NIS 6 million. Scailex realized that the dividend was very risky, given the fact that all the signs indicate that Saban intended to dispose of Partner, and that there was no chance that he would distribute a dividend.

The court, which was asked to approved the agreement, explicitly ruled that Saban was not in compliance with the Hutchison loan, and that there was no economic reason for him to continue holding shares in Partner.

Partner's market cap is nearly NIS 2.5 billion, following an 18% slide in the company's share price this year. The value of the Saban Group's 30.4% holding in Partner is therefore NIS 753 million.

The decline in Partner's share price follows the continued intense competition in the Israel communications market, although Partner's situation is more comfortable than that of Cellcom, its old rival, whose market cap is NIS 871 million, following a 66% plummet in its share price this year.

Partner's debt rating is also better than that of Cellcom - IlA plus, compared with IlA. In its most recent report on Partner, published several weeks ago, rating company Maalot wrote, "We believe that the company's massive investments in the fiber-optic project will result in a low or negative cash flow, and will erode the company's cash, but are likely to support its business profile in the long term."

Maalot wrote that the downturn in Partner's operational performance that began in 2018 would continue in 2019-2020, due to intensive price competition in the mobile telephony market and Partner's inability to fully compensate for it with revenue from its television and Internet services, which are also affected by strong competition.

Saban acquired control of Partner in late 2012 (the deal was completed in early 2013) from businessperson Ilan Ben-Dov, whose companies were in difficulty at the time, and which later collapsed. Saban bought 30.7% of the shares in Partner from Scailex, controlled by Ben-Dov, for NIS 250 million at NIS 32 per Partner share and 20% from Bank Leumi (TASE: LUMI) for NIS 83 million at NIS 26 a share.

Saban also assumed Scailex's $300 million debt to Hutchison, which Ben-Dov took when he acquired control of Partner from Hutchison in 2009. The loan, which was due for repayment in a single payment in 2014 (the repayment date has since been extended), bore 2% interest, and the Partner shares were the security for the loan.

Partner has distributed no dividends to shareholders while Saban has been the controlling shareholder.

Published by Globes, Israel business news - en.globes.co.il - on September 22, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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