It's been a week since Delek Real Estate announced the London offering of its international operations concentrated in Delek Global Real Estate (DGRE), and in that time, the difficulties encountered during the offering were only reinforced.

Even after cutting its price, Delek Global, which is managed by Ilik Rozanski, was able to raise only 100 million pounds sterling (around $200 million), as opposed to the original plan to raise 150 million pounds sterling, which was later downgraded to 100-120 million pounds sterling. This gave the company a value of $1.05 billion.

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But that's not all. On Thursday night, Delek Belron International - the wholly owned subsidiary of Delek Real Estate that is the official owner of DGRE - notified the bourse that in the offering of its subsidiary it acquired 6.25 million of the 50 million shares issued. In other words, Delek itself invested 12.5 pounds sterling ($25 million), or 12.5 percent of the total funds raised. The issue was managed by Merrill Lynch.

DGRE owns income-producing properties in Canada, Britain, Germany, Sweden, Finland and Switzerland. It is now 79 percent owned by Delek Belron International, 16 percent by the public and 5 percent by Igal Ahuvi.

Theoretically speaking, the shareholders' objective in the first public offering is to bring in partners through dilution and not to invest more funds (especially when it is a case of full ownership as in the case of Delek).

Cases where shareholders invest in an offering could occur when they do not manage to complete the offering, or when there are several big shareholders and one of them estimates that the company's value in the offering is adequate, financially speaking, to increase his investment.

Delek International's investment in the financing round, at such a substantial sum no less, indicates that it had to inject demand in order to meet even just the lower limit it had set of 100 million pounds sterling.

The value set for Delek Global in the offering (before the financing round) was 420 million pounds sterling. This value is approximately 25 percent less than the net asset value (NAV) - the total value of the assets owned by the firm - estimated by assessors at 561 million pounds sterling. In other words, investors did not give Delek a premium for the value of the assets, but received a substantial discount.

But it turns out there are some people who managed to protect themselves from the drop in value. Real estate developer Yigal Ahuvi, who was Delek's partner in some projects and sold Delek Real Estate his rights to joint properties before the offering, will now, after the offering, receive compensation with only a 10 percent discount on the NAV.

In early December 2006, Delek Real Estate reported on an agreement with the Blenheim Company, which is controlled by Ahuvi.

According to the deal, Delek would acquire Ahuvi's holdings in 15 foreign companies in which Delek Real Estate and Ahuvi have shared assets. The objective here was to create control or joint control for Delek Real Estate in those foreign companies for the purpose of the Delek Global offering in London. The implementation of the deal was contingent on an offering.

The final value of the Ahuvi-Delek deal was not determined at that time, though it was noted that it would be done "in accordance with the value of the holdings being sold as they will be in the prospectus with the deduction of assorted expenses as stipulated in the wording of the agreement."

At this stage, the value of the holdings was estimated at 91 million pounds sterling and another 10 million pounds sterling were in an option that Ahuvi realized in January for the sale of other properties. It further stipulated that Ahuvi's compensation would be paid via a private allocation (4.9 percent) of Delek Global shares based on the price at which it is issued and the remainder would be paid in cash.

As a result of the drop in the value of the offering, and in accordance with the correlation mechanism, Ahuvi's compensation - the value of his holdings - dropped by 10 million pounds sterling to around 90 million. In other words, despite the fact that the value of the offering was 25 percent lower than the asset value estimated by the assessors, Ahuvi's compensation was only reduced by 10 percent.

That is, Delek paid Ahuvi more than it received for the assets it acquired from him, such that most of the discount given to investors in the offering was absorbed by Delek.

Ahuvi's shares in Delek Global (4.9 percent) are worth around 26 million pounds sterling; the remainder, which he will get in cash, is 64 million pounds sterling. Assuming that the allocation of the 1.9 percent of Delek Real Estate shares that Ahuvi received in December (worth 10 million pounds sterling) is deducted as part of the deal, he will receive 54 million pounds sterling in cash - roughly half the total sum raised in the financing round.

Had the offering succeeded in accordance with the original plan, Ahuvi would have received 100 million pounds sterling for his holdings based on the following breakdown: his shares in Delek Global were worth 34 million pounds sterling (4.9 percent of the planned average value of 692 million pounds sterling), and with the deduction of the allocation of Delek Real Estate shares, he would have been left with 56 million pounds sterling in cash. So all in all he would have been left with the same amount in cash and the same number of shares (which are worth more).

In the event of a success, Delek would have raised 150 million pounds sterling, in which case the sum promised to Ahuvi would have represented only a third of the total value of the round of financing. There was no trading in London yesterday and Friday, and so on Thursday trading in shares of Delek Global closed at 202 pennies - 1 percent higher than the offering price.