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The Government Companies Authority is considering bringing additional underwriters into the public stock offering for the national airline El Al. The GCA is unhappy with underwriters IBI, Leumi & Co., and Discount Capital Markets, and will probably pick additional underwriters on Sunday.

A GCA official said the present underwriters work for the major banks and are not serving the state's interests. They are trying to foil or delay the initial public offering and so the GCA is likely to choose companies not associated with banking.

The source said the banks, which have lent the airline about $900 million, are not interested in seeing the company transferred to private ownership since they prefer state backing for the huge debt. The source said the present underwriters have a conflict of interest and are motivated by external concerns. He said they raised unnecessary obstacles to the IPO, like agreement on the expert valuation to be used.

The GCA has reportedly been approached by additional underwriters who noted the red tape being created by the current crew. The GCA has the right to add underwriters, and their addition is not expected to delay the issue.

The Israeli underwriting market is dominated by subsidiaries of the major banks, Leumi & Co. and Bank Hapoalim's IBI. There are three major, unaffiliated underwriters in the market - Leader & Co, Gmul and Clal Underwriters. One or more of the three is likely to join the El Al team.

One of the present underwriters said there has been legitimate negotiation between the underwriters and the GCA regarding the valuation of the company for the deal. He said the gap is not large and can be bridged. He also said all decisions are made by the board and are completely separate from the parent banks. He said private underwriters do not have the equity necessary to support such a large public offering.

One of the independent underwriters said GCA has not approached them, but said a conflict of interest by the present underwriters is obvious because of the airline's huge debt, so the state from the outset should have chosen an independent IPO leader.

Arkia may sell some routes

Arkia CEO Israel Borovich said it is possible he might sell some of the airline's operations, such as its domestic routes, so as to bid for El Al. Borovich is interested in buying the larger carrier as a strategic partner to the buyout offer made recently by El Al employees. Borovich met with union representatives on Tuesday evening.

Borovich commented on Antitrust Commissioner Dror Strum's comment that he would prevent Arkia or Israir from taking over El Al. "What does Strum know about the plan? Maybe I want to sell the domestic operations and focus on international routes," Borovich said.

"We are interested in El Al, but there is no chance we will go near it if we don't first reach an agreement with labor. We are interested in El Al employees as partners, modeled on the Arkia employee involvement in the company, including representation on the board of directors," Borovich said.

Borovich appeared before El Al union representatives at Ben Gurion International Airport, explaining his business approach concerning El Al's continued operation after privatization. He told the workers representatives he hopes to buy El Al shares in the IPO.

"Two matters remain controversial from our perspective - a long-term labor agreement and the employee stake in the IPO," union representative Michael Kochavi said yesterday.

El Al chairman Michael Levy and CEO Amos Shapiro met with the union late into the night Monday night in an eleventh hour effort to resolve the contract duration question, but failed.

The workers are also not satisfied with the 10 percent stake allocated for them in the IPO, demanding instead an option to acquire 25.1 percent of the company so as to ensure a place on the board of directors. The workers have also put forward a plan to take over the airline with strategic investors in exchange for forgoing money owed them by the airline.

GCA director Eyal Gabbai has not approved a more than 15 percent employee ownership.

Institutional investors slated to buy El Al shares in the institutional phase of the IPO - pension funds, provident funds and insurance companies - are to send representatives to tour its Ben Gurion facilities today.

El Al's spokesman commented on the late night meeting between management and employees: "The airline regularly meets with the employees on all matters relating to labor relations, including the privatization process, all in full cooperation."