Following the unambiguous results of the vote by the IDB Development bondholders and their overwhelming support for the offer by Mega Or (TASE: MGOR) for IDB Development's stake in Discount Investment (TASE: DISI) , on which the bondholders hold a lien, IDB Development's receivers stated this morning that they believed the offer should be approved. They have notified Mega Or that they will apply to the court for approval. Accordingly, Mega Or is required to deposit with the receivers an additional bank guarantee covering 10% of the offer by this Sunday.
The receivers seek an early court hearing on the offer because of the high sums involved and because of events taking place affecting Discount Investment and its subsidiaries, such as the attempt by Aaron Frenkel to take over real estate company Bayside Land Corp. Ltd.(Gav Yam) (TASE: BYSD1), in which Property and Building Ltd. (TASE: PTBL), a unit of Discount Investment, is the largest shareholder.
Yesterday, the IDB Development bondholders voted by a majority of more than 90% in favor of the offer by the investor consortium headed by Mega Or, in preference to the offer by Eduardo Elsztain, who formerly controlled IDB Development.
Mega Or and its partners are offering to buy the 70% of the shares in Discount Investment held by IDB Development on which the bondholders have a lien for NIS 950 million, and to that end have deposited a NIS 142 million bank guarantee. In addition, the Mega Or consortium is offering to buy the remaining 12% of Discount Investment held by IDB Development for NIS 164.5 million.
Mega Or offered the bondholders the possibility of continuing to hold most of the shares in Discount Investment on which they hold a lien, as long as its consortium could buy at least 35% of the company.
For his part, Elsztain made a higher offer for the 70% controlling stake, but he sought to buy the additional 12% only after two years through the exercise of a put option that would be given to the bondholders. The bondholders, however, feared that Elsztain would have difficulty in raising the amount required to purchase the shares now, and would not meet his commitment to buy the remaining shares after two years.
Discount Investment is a holding company that controls real estate company Property & Building, telecommunications company Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), agriculture company Mehadrin Tnuport Export LP (TASE:MEDH), technology investment company Elron Electronic Industries Ltd. (TASE: ELRN), and investment house Epsilon. On September 25, Elsztain lost control of the company when a trustee was appointed to run IDB Development and receivers were appointed for the company's controlling stake in Discount Investment. During the six years that Elsztain controlled Discount Investment, its share price fell by about half (adjusted for dividends).
Mega Or controlling shareholder Zahi Nahmias plans to retain only the real estate activity of Discount Investment (Property & Building and Mehadrin) and to sell the rest of its assets. The proceeds of these sales, together with the NIS 1.9 billion cash already held by Discount Investment, will be used to repay Discount Investment's debt of NIS 3.6 billion. After that, it will be possible to delist the company and raise Mega Or's exposure to Property & Building and its main assets, chief among them its 29.9% stake in Bayside, in which Aaron Frenkel has been building a position.
Published by Globes, Israel business news - en.globes.co.il - on November 11, 2020
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