Naty Saidoff, who is due to acquire Eurocom, is pressing Eurocom's creditor banks to intervene legally in the battle for control of the board of Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), which Eurocom indirectly controls. Saidoff's representatives are due to meet the creditor banks (Israel Discount Bank (TASE: DSCT), Bank Hapoalim (TASE: POLI) and Bank Leumi (TASE: LUMI)) today to make clear to them that if, as it emerges from recent events, Eurocom has no influence on the Bezeq board of directors, Saidoff will not go ahead with the acquisition.
Saidoff's representatives do not intend to ask for a reduction in the acquisition price, which values Eurocom at over NIS 1 billion. As far as Saidoff is concerned, the substance of the deal is control of Bezeq, Israel's largest telecommunications group. If because of the current control battle on the Bezeq board, Eurocom will be unable to appoint directors on its behalf, then from his point of view the deal is pointless.
Last week, the Bezeq board decided to cut the company's dividend to 70% of net profits. This too is not good news for the Saidoff group. This is, however, a reversible decision, if they are able to appoint Eurocom representatives to the Bezeq board after acquiring control of the former.
The banks are not keen to intervene in this explosive matter, especially given their status - creditors of the fourth floor of the pyramid above Bezeq. Discount Bank CEO Lilach Asher-Topilsky commented on it in the press conference held by the bank when it released its 2017 financials, saying, "We are not intervening in the question of the board structure and take no position on the matter."
Nevertheless, if Saidoff's representatives apply pressure and make clear that they will withdraw from the deal, the banks are likely to change their minds. Although there are other potential buyers interested in Eurocom, putting together a new deal is a complicated task and involves no little risk, especially considering the current dramas on the Bezeq board. The banks are therefore likely to do all they can to prevent the deal with Saidoff falling through.
The timetable is also pressing. The court is due to approve the debt arrangement in Eurocom on Tuesday, and by then matters will need to become clear regarding the battle for control of Bezeq and of course the banks' stance on the mater.
The Saidoff group is offering the banks an injection of NIS 475 million into Eurocom and a commitment to repay NIS 565 million of debt (which includes the debt to the creditors of Eurocom Real Estate). The deal also includes an upside mechanism that could yield the banks a repayment of up to NIS 400 million, although the chances of the banks actually benefitting from a repayment under this clause are not clear. Altogether, the banks are expected to end up with a write-down of NIS 400-500 million after the debt arrangement in Eurocom.
Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018