Rami Levy opens bidding for Israir

Rami Levy / Photo: Jonathan Bloom , Globes

Through BGI Investments, Levy and Shalom Haim are offering the IDB Development trustee NIS 70 million for the airline.

Rami Levy and Shalom Haim seek to buy Israir Airlines and Tourism Ltd. for just NIS 70 million ($20.4 million). This is a low offer, reflecting the damage to the tourism industry from the coronavirus pandemic, and it may well be rejected by the trustee for Israir's parent company IDB Development, which owns the airline outright.

Rami Levy and Shalom Haim (through his private company Taaman) hold equal shares in Shay Odem, which holds 67.7% of BGI Investments (1961) Ltd. (TASE: BGI). BGI Investments announced today that it would bid to buy Israir in a combined deal with Shay Odem or its owners Rami Levy and Taaman.

BGO Investments is offering to buy 100% of Israir for NIS 70 million. In addition, under the proposed deal, Israir will forgive a $5 million debt owed to it by IDB Development.

BGO Investments has made the offer to Adv. Ophir Naor, who was appointed by the court as trustee for IDB Development following the collapse of the company, which was controlled by Eduardo Elsztain. The trustee has no obligation to accept the offer, and may prefer to wait until the global aviation sector recovers, improving Israir's financial position and its value.

BGI Investments is at present a company with no activity, and a market cap of NIS 45 million. It has entered into an agreement with its parent company Shay Odem whereby the latter will invest NIS 26 million in it at NIS 1.07 per share (representing a 14% discount on the market price), such that after the share allocation Shay Odem will hold 80% of BGI.

Shay Odem will also give BGI Investments a loan which, together with its existing cash, will serve for the acquisition of Israir.

Sources familiar with the matter said today that further bids for Israir are expected in the next few days, raising its price. The current offer is seen as an opening, low bid, given that Israir has demonstrated its ability to cope with the severe global crisis that the coronavirus pandemic has inflicted on the aviation and tourism industries.

Israir's revenue has fallen sharply since March this year, but it has continued to operate the entire time, unlike El Al Israel Airlines Ltd. (TASE: ELAL) and Arkia Airlines Ltd., which decided to shut down and put almost all employees on unpaid leave. Only recently have El Al and Arkia reinstated scheduled flights, with wretched timing, since the Israeli government's latest coronavirus measures do not allow Israelis to fly, except for anyone who bought a ticket by September 25, so that in effect the skies are closed.  

Rami Levy's name was mentioned in the past few months in connection with buying El Al. Levy did not deny being interested, but it seems that in the light of El Al's plight he decided to hold back, and perhaps he realized that it would be very risky deal. It could be, however, that the idea of an airline in a less challenging situation than that of El Al still appealed to him, perhaps with an eye to the long term, in which the prospect of a merger between El Al and Israir is not entirely fanciful.

Buying an airline in the midst of the industry's worst ever crisis, with the recovery horizon constantly receding, has to reflect great optimism and a firm belief that the airline in question can generate profits. The Israeli aviation industry is challenged not only by the pandemic, but also by the competition it will face from airlines from the United Arab Emirates, which are due to enter the local market. Israir has already declared that it will launch flights from Tel Aviv to Abu Dhabi and Dubai, and will sell vacation packages with hotels. Israir CEO Uri Sirkis recently visited the UAE and made agreements with hotel and tourism chains there.

Published by Globes, Israel business news - en.globes.co.il - on October 4, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Rami Levy / Photo: Jonathan Bloom , Globes
Rami Levy / Photo: Jonathan Bloom , Globes
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018