Tshuva letting go of Delek Auto

After controlling the company for 12 years, Yitzhak Tshuva's Delek Group is en route to halving its holding in one of its most profitable companies, Delek Automotive. The prospective buyer is none other than Delek Automotive's own CEO, the renowned Gil Agmon, who is already the second-biggest shareholder in the company with a 16.4% interest.

Delek Automotive is the group's car importing arm. It imports Mazda and Ford vehicles.

	Yitzhak Tshuva
	Photo by: David Bachar

The deal, under which Delek would sell half its 54.8% stake to Agmon, has reached advanced negotiations. The shares are worth NIS 2.1 billion, based on their market cap.

As of year-end 2009, Delek had booked its holding in Delek Automotive as being worth NIS 367 million. Assuming the deal comes to fruition, Delek will be posting a significant capital gain on the sale.

How much actually changes hands depends on whether Agmon will be required to pay a control premium, and how much that might be.

The final agreement is still taking shape. Insofar as could be ascertained, the parties have not yet finalized what the future control structure would look like.

Agmon, one of Israel's best-remunerated CEOs, is expected to finance the acquisition using his own resources, bank loans and perhaps a loan from Delek itself.

Sources near Delek say one reason for the deal would be to increase Delek's liquidity. Most of the proceeds would be given to shareholders as dividends, they say. Tshuva himself owns 64.5% of Delek Group and would receive a major liquidity boost himself.

Delek Automotive has been hugely profitable. Since the start of 2000, it has racked up NIS 3 billion in profits, and contributed NIS 1.9 billion in profit to the parent company Delek Group itself. It has disbursed NIS 3.2 billion in dividends since 2000, of which Delek Group received NIS 1.5 billion. As for its share, it has returned 900% to investors in that time.

Between 2000 and June 2010, Delek Automotive has sold 255,500 Mazdas and 110,000 Fords.

Gil Agmon has been its CEO since 2003.

He proved not only to know all about cars, but to have keen financial senses as well. In 2000-2002 he bought 14.5% of Delek Automotive shares from Delek Group and from Bank Hapoalim for NIS 140 million. In March 2004, he took advantage of a spike in the share price to sell part of the stake, in order to repay the loans he'd taken: for 8% of the company, he received NIS 231 million. He still owned 6.5% of Delek Automotive's stock. Less than two years later he bought another 10% stake in the company from Delek for NIS 255 million, bringing his stake to 16.5%. Now that 10% he bought is worth NIS 380 million, based on its share price.