IKEA's planned Beit Shemesh branch hits legal snag

IKEA Negev Photo: Roei Lind

Moshav Eshtaol alleges that it has a first refusal right to the land for the branch, which is part of the moshav.

Moshav Eshtaol near Beit Shemesh recently filed a petition for a restraining order against implementation of a deal that will force it to be a partner with the Bronfman-Fisher-Mega Or Holdings Ltd. (TASE:MGOR) partnership, the IKEA Israel franchise owners, in a company for constructing the industrial park on the moshav's land. According to the moshav, located north of Beit Shemesh, it signed an agreement with YD Barazani in 2006 for construction of a joint industrial park, but YD Barazani did not build the park; it sold its shares to the IKEA Israel owners without the moshav's consent, and without improving the terms in the 2006 deal. The legal dispute is liable to delay construction of another IKEA chain store in Israel.

The petition for a restraining order filed by the Eshtaol Cooperative Society at the Jerusalem District Court by Advocates Prof. Avi Weinroth and Ariel Dinovetskey, asserts that in 2006, the Eshtaol Cooperative Society obtained an option under Israel Land Council Resolution 717 to build an industrial park on a 57-dunam (14.25-acre) parcel of land on the moshav near Highway 38 at the approaches to Beit Shemesh.

In order to finance and carry out the project, the moshav contracted an investment agreement with YD Barazani in December 2006, whereby the latter would build the project. Under the agreement, YD Barazani's share in the joint company founded with the moshav for building the industrial park was 74%, while Eshataol's share was 26%. The petition states that soon after this agreement was signed, YD Barazani declared its intention of building the project within three years - a project that would have provided the moshav with a long-term source of income.

The moshav asserts that what actually happened was that 12 years passed without YD Barazani constructing a single building on the land or anything changing there. The moshav adds that YD Barazani tried for a long time to sell its share of the company and exit the deal with a profit. The petition alleges that the moshav recently learned that YD Barazani had contracted an agreement in July 2017 with Mega Or, controlled by Tzahi Nahmias, and the Bronfman-Fisher partnership to sell its shares in the industrial park company for NIS 44.5 million. "This agreement was signed without the moshav's knowledge and behind its back, and was not drawn to its attention in real time, despite the refusal right stipulated in the investment agreement between the moshav and YD Barazani," the petition states.

"In a minority position against real estate sharks"

The moshav asserts that YD Barazani cannot force a different partner on it, and that in such a case, the investment agreement stipulates that the moshav has a first refusal right. The logic behind this right is that the moshav is not a business concern; its members received an allocation of land in order to given them a livelihood. "If, God forbid, the transaction is completed, the moshav will find itself in a minority position in the company, in which a partnership is being forced on it with known real estate sharks," the moshav states in its petition, and mentions that there is an agreement between Mega Or and the Bronfman-Fisher partnership to buy the land in order to construct IKEA branches in Israel, and that an IKEA branch was built in Beer Sheva on this format, among other things.

Indeed the moshav claims in its petition that the parties combined with lack of good faith in order to deny the moshav's basic refusal right, with Barazani gaining a huge profit and the new buyers forcing themselves on the moshav, while at the same time initiating press reports about the construction of an IKEA branch on Eshtaol's land in order to create an accomplished fact, while ignoring the moshav's rights. "This is an extremely grave act, because even if this partnership had some right in the company, the rental agreement between the company and another company (IKEA) is clearly a party at interest transaction requiring the moshav's consent. The buyers are therefore treating the moshav as if it were air."

Last January, a meeting took place between representatives of the moshav and the new buyers, at which it was made clear to the buyers that the moshav had not waived its refusal right, and that the sale of shares in the industrial park company could not be completed without the moshav's consent. In addition, the representatives made it clear that there was a possibility of the buyers taking the place of YD Barazani while improving the terms of the 2006 investment agreement in exchange for the moshav waiving its refusal right.

The petition states that YD Barazani and the new buyers had done nothing to obtain the moshav's consent, but had taken rapid action to complete the deal, and announced that they regarded the moshav as having waived its right of refusal. The buyers (Mega Or and Bronfman-Fisher), it is alleged, even summoned the shareholders to a general shareholders' meeting on March 15, as if they were already shareholders in the company and were seeking to exercise their rights as the new "owners," while ignoring the moshav's right.

Moshav Eshtaol is asking the court to prevent this action by halting the parties' attempt to establish accomplished facts. Judge Shirley Renner scheduled a hearing in the presence of the parties for this Thursday.

Developers' representative: No grounds for a lawsuit

Advocate Avraham Aberman from the Ephraim Abramson & Co. law firm, who is representing the Bronfman-Fisher group and Mega Or, said in response, "There are no grounds for a lawsuit. Moshav Eshtaol's ex parte petition was dismissed by the court, and we will respond in detail to the court in the coming days."

No response was obtained from YD Barazani.

Published by Globes [online], Israel Business News - www.globes-online.com - on March 19, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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IKEA Negev Photo: Roei Lind
IKEA Negev Photo: Roei Lind
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