Last Thursday, IDB Development, controlled by Eduardo Elsztain, completed the sale of 5% of Clal Insurance to Eyal Lapidot, CEO of Shikun & Binui Holdings Ltd. (TASE: SKBN) and until recently CEO of The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5).Lapidot has applied to become a director of Clal Insurance, and market sources estimate that he will receive the blessing of director of the Israel Capital Markets, Insurance and Saving Authority Moshe Bareket.
In its notice to the Tel Aviv Stock Exchange, IDB Development stated that the shares sold to Lapidot were those sold to a local bank in a swap transaction in 2018, and that they had now been transferred to Lapidot following the closure of that transaction. From the figures supplied by IDB Development, it emerges that the shares were sold in the past for NIS 61.54 per share, but the company remained exposed to changes in the price because it chose to sell them in a swap transaction rather than in an outright sale. The shares have now been sold to Lapidot at the low price of NIS 47.70 per share, so that the decision on the previous sale as a swap transaction can in retrospect be seen to have occasioned a loss of NIS 38 million.
The shares were sold to Lapidot for a total of NIS 132 million, but in the terms of the sale, IDB Development undertook to provide a seller's loan of NIS 118 million to finance the deal. It turned out that IDB Development was unable to finance the loan, and it therefore agreed to sell the seller's loan to Klirmark Capital for NIS 93.5 million. In the end, therefore, IDB Development received NIS 107.5 million on Thursday for shares that it could, on the face of it, have sold for NIS 170 million in January 2018, meaning a loss to the company of NIS 60 million.
Following completion of the deal with Lapidot, IDB Development directly holds 15.35% of Clal Insurance, and it is also exposed to another 15% sold in 2018 in the swap transaction. The company says that it continues to examine possibilities for selling at least 5% of Cal Insurance, under the schedule for selling the controlling interest in Clal Insurance formulated by the previous director of the Capital Markets, Insurance and Saving Authority, Dorit Salinger.
Under the schedule, IDB Development is obliged to sell 5% of Clal Insurance by January 1, 2020, and a further 5% by May 1, 2020. It will be able to remain with just 5%. The company says that it will probably sell the tranche due to be sold by January 1, 2020 against the purchase of its 9 and 14 series bonds. The move is designed to take advantage of the low prices of the bonds. It made a similar move two months ago.
In recent weeks, IDB Development has also been busy with an attempt to offer new series 15 bonds to the tune of NIS 200 million, secured on 10% of the shares in Clal Insurance (half of which will be sold by May 2020), worth some NIS 300 million. The proceeds of the offering are earmarked for a repayment of NIS 485 million due in November to holders of the company's 11 and 13 series bonds.
Published by Globes, Israel business news - en.globes.co.il - on November 11, 2019
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