About half an hour after midnight last night, the IDB group reported, as expected, that it had decided not to complete the deal for the sale of 4.99% of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) to Eyal Lapidot for NIS 132 million under the current terms. This represents a unilateral breach of the agreement by IDB, which was due to have completed the deal yesterday (Sunday), after receiving notice from Lapidot in mid-June that he would exercise the option on the shares that IDB gave him.
In its report to the Tel Aviv Stock Exchange, IDB Development Corporation Ltd., controlled by Eduardo Elsztain, stated: :"The loan agreement between the parties has not yet been concluded and signed" and that it "continues to make arrangements for completion of the agreement." The upshot of the announcement is that IDB Development may perhaps wish to complete the deal, but only after amendments to the sale agreement, and particularly to the terms of the seller's loan that is a material part of it.
Under the deal between Lapidot and IDB Development, IDB Development undertook to award Lapidot a seller's loan of NIS 118 million to finance the purchase of Clal Insurance shares. The loan was to have borne annual interest of 4% and to have been repaid (principle and interest) in one payment five years from the loan date.
On June 17, it was reported to the Tel Aviv Stock Exchange that Lapidot had exercised the option given to him by IDB Development to buy 5% of Clal Insurance from it. The option was awarded following two other deals in which Mori Arkin and Yakir Gabay each bought 5% of Clal Insurance for NIS 132 million, at NIS 47.70 per share. In addition, one of the pair (apparently Arkin) was given an option to increase his stake in the insurance company by a further 3% at NIS 50 per share within 120 days, subject to approval of the Commissioner of Capital Markets, Insurance and Savings.
The deal with Lapidot was not completed after IDB Development failed to find a financial institution that would agree to step into its shoes and become the lender in the loan that was awarded without collateral. In the past few days, IDB Development has tried to change the terms of the loan, and a long meeting took place between its managers and Lapidot and his advisers, but the sides failed to reach agreement. IDB development sees Lapidot as someone who can contribute to Clal Insurance, and as a high quality investor who could change the company's position in the future, but is also in need of cash, which the share sale agreement hardly provides.
Because of the uncertainty over whether Lapidot will join the list of shareholders in Clal Insurance, the company's share price fell today, contrary to the trend in the sector.
Published by Globes, Israel business news - en.globes.co.il - on July 29, 2019
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