Partner buyout is one of Israel's least leveraged deals, alleges Ilan Ben-Dov

Capital market players have been wondering about the leverage Ilan Ben-Dov will need to finance his acquisition of Partner Communications: He is buying a 51% interest in the mobile services provider for NIS 5.29 billion. But Ben-Dov told institutional investors on Sunday that in his opinion, the deal is one of the least leveraged and least risky ever transacted in Israel.

Ben-Dov is carrying out the deal through his company Scailex. On Sunday, in a road show to prepare for tapping the capital market for funds, he presented investors with Scailex's plans for the Partner takeover.

According to representatives of institutional investors who attended Sunday's meeting, Ben-Dov explained that he plans to sell about NIS 800 million worth of Partner shares to other entities. That lowers his investment to NIS 4.5 billion.

The seller, Hong-Kong based company Hutchison Telecommunications, is providing NIS 1.2 billion in vendor financing, thus further reducing the sum Ben-Dov has to fork over to NIS 3.3 billion, he said.

"Even though this [NIS 1.2 billion] is a loan," said Ben-Dov, "it will not come due for another 4.5 years, after repayment of the bonds issued on the capital market. And the dividend this year should be about NIS 1 billion, as we intend to disburse 100% of [Partner's] profits, just like Bezeq and Cellcom. So the figure drops to NIS 2.3 billion."

Ben-Dov told the institutional investors that his true shareholder equity position is about NIS 2 billion. "Even though the equity on the books is lower than that, we had income-producing activities at Scailex even before the Partner purchase, which netted NIS 160 million in the first half of the year," he said.

Yesterday, Scailex set out to raise NIS 800 million from the general public, after assuring itself of NIS 1 billion in the institutional phase of its bond offering.

One reason the institutional bond offering went so well is that Ben-Dov is backing 100% of the debt with collateral: rights to Partner shares.

Although Israeli investment circles had been howling about the dearth of backing behind previous bond offerings, in fact few companies issuing bonds these days are providing collateral.

Ben-Dov's "partners" in the deal are Bank Leumi, which is buying 5% of Partner for NIS 515 million, and apparently Bank Mizrahi-Tefahot as well, which is expected to buy 2% for NIS 200 million.

Shares of Scailex gained 1.7% on the Tel Aviv Stock Exchange yesterday, on turnover of NIS 5.2 million. Partner stock gained 1.8% on turnover of NIS 14.4 million.