US investment company Searchlight has submitted a binding bid for the purchase of shares from Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) in B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM), the controlling shareholder in Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ). The bid reflects a share price of NIS 17 for B Communications. Since Internet Gold owns 19.4 million shares, a 52% stake, in B Communications, the bid comes to NIS 330 million.
The offer includes an upside that could increase B Communication's share price by NIS 8, raising the amount paid to NIS 490 million. The full bid entails a 20% loss for the bondholders (including the cash currently held by the company). Internet Gold owes NIS 722 million to its bondholders.
In its report, Internet Gold stresses that its board of directors has not yet approved the bid, and also stated that the bid would be brought to its bondholders for approval. The bondholders hold effective ownership of the company when payments on the bonds were recently halted.
Searchlight's bid includes a number of suspending conditions, including the appointment of three directors to represent it on Bezeq's board of directors as soon as the deal is closed. Shlomo Rodav will remain a Bezeq director representing B Communications, probably as chairperson. Searchlight is also demanding a majority on B Communications' board of directors. Searchlight is willing to go ahead with the deal even if there is a substantial reduction in the value of value of Bezeq's subsidiary, DBS Satellite Services (1998) Ltd. (YES), or in Bezeq's tax asset in respect of Yes's accumulated losses.
Bezeq recently warned about a decline in Yes's value, which resulted in steep declines in the share prices of Bezeq and B Communications. This also affected the failure of Internet Gold's recent auction for its shares in B Communications. Searchlight was one of the participants in the auction, and continued talks with Internet Gold after the auction failed.
Searchlight's binding bid stipulates a NIS 40 million fine for Searchlight, should it withdraw its bid. At the same time, Internet Gold and its bondholders will have to pay a NIS 4 million fine if the bid is approved by the upcoming bondholders' meeting, but does not receive court approval, and Internet Gold and its bondholders later retract the deal.
Internet Gold's bonds are up 6% in today's trading, while Internet Gold's share price plunged 14%. B Communications' share price is up 1% and Bezeq's share price is up 0.7%.
Published by Globes, Israel business news - en.globes.co.il - on February 10, 2019
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