Haim Saban, the Israeli-American media mogul who once shared control of Bezeq, is weighing a return to the telecommunications industry.
Ilan Ben-Dov's holding company Scailex said yesterday that it was in talks with Saban to sell him its controlling 44.5% of Partner Communications. But the company added it was also in negotiations with otherparties to sell the stake - and that the talks with Saban had not yet yielded any agreement.
"The company is holding talks with the Saban group and simultaneously is examining other deals with additional entities," Scailex said. "No agreements have been reached with any entity and there is no certainty these talks will result in a binding agreement."
Meanwhile, TheMarker has learned that Saban also previously explored buying control of Cellcom Israel. His representatives held talks with Nochi Dankner's IDB group, Cellcom's parent company, but the discussions stopped short because Dankner sought too high a valuation for the company.
Both Ben-Dov and Dankner are carrying massive debts and need to find cash quickly. Ben-Dov was close to selling Partner back to the Hong Kong conglomerate Hutchison Whampoa in the summer, before the latter rescinded its offer.
News of the talks between Scailex and Saban lifted the shares and bond prices for all the companies involved in trading on the Tel Aviv Stock Exchange yesterday. Partner stock jumped 7.4% to NIS 21.80, raising its market valuation to NIS 3.4 billion. Scailex soared 41.8%, while its bonds rose as much as 12%, although that still left them at junk yields of up to 80%.
Of Scailex's Partner shares, 16% of the 44.5% are pledged to bondholders and 12% to Hutchison, which made a $300 million loan to Scailex to buy Partner from it three years ago.
If Saban does agree to buy Partner, he will acquire it in stages, taking the 16.6% of Scailex's Partner shares that are unpledged for a sum of NIS 550 million to NIS 650 million, or NIS 22 to NIS 25 each.
Meanwhile, Saban reportedly will open talks with Bank Leumi about buying its 5% Partner stake at the same price, or a total of NIS 200 million. Likewise, he will try and buy out other major Partner shareholders, such as Migdal Insurance and the investment house Excellence.
Market sources believe Leumi would answer favorably to an offer of NIS 25 a share, but the bank has not yet been approached. .
Another aspect of the Partner deal would have Saban injecting somewhere between NIS 700 million and NIS 1 billion into Partner, in exchange for an issue of new shares. That would dilute the existing shareholders, including Scailex, which would have to approve the plan.
That cash would be used to bolster Partner's balance sheet and enable it to resume paying out big dividends. The company recently canceled its payout policy, which had assigned 80% of net profit to dividends.
In spite of the big shake-up in the mobile market earlier this year, Partner continues to generate NIS 1 billion in cash annually and has less debt than Cellcom. That explains why Saban apparently values it at about NIS 4 billion.
If Saban's multipronged strategy is completed as planned, he will end up with between 35% and 40% of Partner, at an investment of NIS 1.5 billion. Scailex will hold 20% and the rest held by the public.
But many in the capital market believe that Saban will also make a general offer to minority shareholders at a total cost of NIS 400 million to NIS 500 million, which would put him in complete control of Partner.
Saban, together with the British buyout fund Apax and Israeli entrepreneur Mori Arkin, sold Bezeq to Shaul Elovitch in 2010 for NIS 6.5 billion, earning Saban a 300% return.
Two obstacles stand before Saban. The first is Scailex's bondholders, who among other things may demand immediate repayment of the debt if he takes control. The second is Hutchison, which may be asked to consider a delay in Scailex's repayment of its loan as part of the Saban takeover.
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