Delek RE Sells Vitania Stake

Three buyers include Harel, Flying Cargo and Vitania's founders.

Delek Real Estate's latest sally of selling in order to meet its towering liabilities has centered around Vitania: The Delek Group, which is these days managed by Eran Meital, struck an agreement at the end of last week to sell its 46% interest in Vitania for NIS 164 million - to no less than three buyers.

The price reflects a shrunken company value of NIS 355 million for Vitania, which is nearly 6% more than its shareholders' equity as of September's end. It's also well below the NIS 410 million company value at which Delek Real Estate converted Vitania bonds into 50% of its stock in late 2007. And that's also lower than the NIS 380 million company value at which Delek Real Estate offered its sister company, the insurance company Phoenix, the right of first refusal in order to buy 20% of Vitania's stock a few months ago.

delek - Ofer Vaknin - December 27 2010
Ofer Vaknin.

Delek Real Estate is not expected to post any significant loss or gain from its sale of Vitania shares.

What it gets out of the deal is precious cash, to help repay the billions upon billions of shekels it owes to bondholders, banks and Phoenix.

Delek Real Estate actually struck three separate deals for its shares in Vitania, which initiates, constructs and markets real estate in Israel, the United States and Poland. Vitania owns about 90,000 square meters of revenue-yielding property and the rights to build 136,000 square meters more of such property.

The buyers are as follows: The Harel finance group bought 20% of Vitania; another 20% was bought by Flying Cargo, a privately held forwarding company owned by brothers Avi and Danny Reich; and lastly, Vitania's own founders are increasing their share by 6%.

Harel will be paying Delek Real Estate NIS 71 million for its share, apparently both from money under management in investment funds, and from its own proprietary investments portfolio.

The insurance and finance group has been expanding its investment in shares of real estate companies, such as Housing & Construction and Azorim, as well as investing in property directly, here and abroad. Its aim is to diversify its investments range, taking advantage of current market conditions.

Flying Cargo will also be paying about NIS 71 million for its Vitania stake, while the Vitania founders will be handing over about NIS 21.4 million.

The rest of Vitania, which was founded 15 years ago, is widely scattered in terms of owners. Gitam Image Promotion Systems, owned by Moshe Theumim and Mody Kidon, owns 12.5%. Industrialists Dan and Gad Propper, more famous for their control over the Osem foodstuffs manufacturer, also own 12.5%, as does Hamama Brothers & Co, which is also more famous for other things - such as sunflower seeds and spices.

Vitania was one of the better assets in Delek Real Estate's portfolio. Most likely the company wouldn't have parted ways with it if not for its need for liquidity. Delek Real Estate is expected to use NIS 80 million of the proceeds to repay Phoenix in January 2011, still leaving a debt behind of NIS 60 million to that company alone.

In the last year, Delek Real Estate has sold NIS 1.8 billion worth of assets and met all its liabilities on time.