The merger between Koor Industries and Discount Investment is being put on hold.
Discount Investment made the announcement on Tuesday without giving any details, stating only that the drop in the value of the two companies' negotiable securities and in their share prices led to the halt. Both companies are part of Nochi Dankner's IDB group.
Koor was to have been merged into Discount. Discount Investment owns about 70% of Koor already, and IDB Development owns a further 13.3% stake in Koor.
The failure of the merger is bad news for IDB Development, which had hoped to receive some NIS 330 million to NIS 400 million for its Koor shares, thus easing its debt repayment burden.
Only two years ago, Discount Investment had a market cap of NIS 9.1 billion. On Tuesday, after the share fell another 4%, the company had a total value of only NIS 654 million. Koor has also fallen 38% in value in recent months as its holding in Swiss bank Credit Swiss has lost value.
Discount Investment's debts are higher than the value of its assets, and the company has thinned out its cash by paying NIS 1.52 billion in dividends, as well as providing Maariv with some NIS 300 million. It has also paid back NIS 900 million in debts so far this year, and is now left with cash and cash equivalents of only NIS 600 million - and it owes NIS 5 billion to bondholders and another NIS 800 million to the banks. Its bonds have now reached yields of 19%.
As a result Koor bondholders have been unwilling to agree to a merger, as they have no interest in swapping their Koor bonds for those of IDB. Koor has NIS 2.5 billion in the kitty and only NIS 1.8 billion in debts.
