UBS grabs 5% Bezeq stake in dawn tender
The Swiss investment bank UBS won Thursday's tender for the purchase of 5.25 percent of Bezeq with a price of NIS 4.82 per share. This price is 2 percent higher than the price at which the company was trading on Wednesday when trade was halted due to publication of the tender.
The sale reduces the government's stake in the local telephone monopoly to below 50 percent, meaning Bezeq has now stopped being a government company and has become a "mixed company" instead. Therefore, while the state still holds a controlling stake, Bezeq will no longer be subject to all the restrictions that apply to government companies.
Among other things, this means that Bezeq will now be able to exercise its option to buy the other 50 percent of cellular telephone operator Pelephone and another 5 percent of Yes, the direct broadcast satellite television operator, without turning those companies into government companies - an outcome that had kept Bezeq from exercising its options.
The tender also gave the winner an option to purchase up to 30 million additional shares at the tender price, and UBS decided to purchase 15 million. This brought its stake in the company up to 130 million shares, or almost 6 percent, and raised the price of the deal to NIS 698 million.
However, most of these shares were bought on behalf of other clients. Though UBS kept a few million shares for its own portfolio, it transferred 70 percent of the remainder to foreign investors and the other 30 percent to Israeli investors. The largest purchaser was a European financial investor who bought some 40 percent of the shares for about NIS 250 million; another foreign investor also purchased a substantial block worth tens of millions of shekels.
The offering's success gave a boost to Bezeq shares on the Tel Aviv Stock Exchange. During most of Thursday, the share traded well above the price at which the tender closed, enabling those who purchased the shares from UBS to unload them immediately at a profit. The share ended the day up 2.7 percent, at NIS 4.85 per share, on exceptional turnover of NIS 207 million.
In total, four bidders besides UBS competed for the shares: a consortium comprised of Leumi & Co., Excellence-Nessuah Zannex and Ofek, whose bid was 1.7 percent above the share's closing price on Wednesday; a consortium comprised of Gmul Sahar, Leader and Lehman Brothers; a consortium consisting of Poalim-IBI and Merrill Lynch, and a consortium of Clal Underwriting, Ilanot Batucha and Credit Suisse.
Participants in the tender said that the Government Companies Authority lucked out in its timing: Since the tender was issued at 4 P.M. on Wednesday, the bids were being prepared while the trading day in New York was in full swing - and the rises on Wall Street as the day wore on, coupled with the fact that the TASE closed up 3 percent, encouraged bidders to up their offers. "By late evening, we already felt that [the competition] was going to be hot," said one disappointed bidder. "There was widespread interest, both in Israel and abroad."
Regarding the UBS offer, the bidder said, "It's a phenomenal price that pushes the share forward."
Yaron Bloch, the head of UBS's Israel desk, explained: "We wanted to win the tender, not to lose it over half a percent, so we agreed on a relatively high price." This decision - aided by the fact that UBS had lined up two large foreign clients to take a substantial portion of the shares - allowed the Swiss bank to finish its bid relatively early. Most of the other bidders ruefully acknowledged that they were up all night on the project.
The success of Thursday's tender was in marked contrast to the last government tender for Bezeq shares, which took place just three months ago. In that tender, the highest bid the state received was 6 percent below the share's market value, meaning the sale brought in only NIS 375 million.
The share's gain on the TASE yesterday was also noteworthy, since often, a tender that floods the market with a large quantity of new shares creates oversupply that initially pushes the price downward.
The strong demand for Bezeq shares evidenced by the tender results was particularly impressive given that the company's two major shareholders - the government and the banks - are dying to get rid of their stakes. The government, which following Thursday's sale owns 49 percent of Bezeq, is hoping to unload its remaining shares next year. Another 19 percent is owned by a consortium of banks, which received them as collateral for a loan to businessman Gad Zeevi on which he later defaulted, and would now like to sell them to get their money back.
Over the last three months, the state has sold a total of NIS 1.07 billion worth of Bezeq shares, but Thursday's package was the largest amount it has ever sold off at one time. The government now hopes to sell another 8 to 9 percent on the market in the coming months, after which it will try to sell the remaining 40 percent as a controlling stake.