Nochi Dankner's IDB group announced plans yesterday to flatten its pyramid by merging two key holding companies, Koor Industries and its parent firm Discount Investment Corporation. The purpose of the move is to gain liquidity ahead of bond repayments due this year.
Koor will then be delisted from the Tel Aviv Stock Exchange. All its assets - and liabilities - will be assigned to Discount Investment, after which Koor will cease to exist.
The move is being negotiated, but should be completed by the end of the second quarter, said IDB Holding Corp, the company at the top of the pyramid.
Discount Investment owns 70% of Koor. IDB Development Corporation, the parent of Discount Investment, owns 13.3% of Koor. The remaining 16.7% of Koor is owned by the public.
The merger means public shareholders will receive cash for their shares. Koor bonds will become bonds of the merged company.
IDB said it intends to establish two independent boards of directors for Koor and Discount Investment to manage the negotiations and set the terms of the merger. "The companies are acting now to choose an outside and independent appraiser to be appointed jointly to appraise Koor for the purposes of the merger," wrote IDB in its announcement to the TASE.
The appraisal is crucial as it will determine the value of the shares in the merged companies, and the price per share of the public tender. As of yesterday, Discount Investment had a market cap of NIS 2.1 billion, and Koor was worth NIS 2.3 billion.
Selling Mashav
Just this week IDB agreed to sell Mashav Initiation & Development (a subsidiary of Clal Industries - another IDB group company ) to the Livnat family, which shares ownership of the IDB group with Nochi Dankner. The sale, which still needs antitrust approval, has Clal Industries selling 55% of Mashav for NIS 1.32 billion. This reflects a NIS 2.4 billion value for Mashav.
Mashav controls the Nesher cement monopoly and part of the Taavura haulage company. Its sale is a major concession on Dankner's part,:but he needs the liquidity to pay back IDB's debts.
The decision to merge Koor and IDB Investment is not a surprise. Koor has four main holdings: 40% of agrochemical manufacturer Makhteshim Agan Industries, which it sold four months ago to China National Chemical Corporation; a stake in the Swiss bank Credit Suisse; 12.2% of the EMCO private investment fund; and control of the Epsilon investment house.
The desire to simplify the organizational structure of IDB is driven by state's committee on economic concentration, which will publish its recommendations in coming days.
These are expected to include restrictions on "wedge companies" - pyramidal firms in which there are multiple levels of control of subsidiaries and the controlling owner at the top of the pyramid owns only a minority share of the equity of the companies it controls at the bottom - such as IDB and Koor. The recommendations include more power for minority shareholders in such cases.
