Supermarket Giant Rami Levy Makes Offer for Struggling Israir

Low-ball bid expected to be rejected by bondholders who control airline’s parent company

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A Rami Levy in the Rosh Haayin industrial zone, March 5, 2020.
A Rami Levy in the Rosh Haayin industrial zone, March 5, 2020.Credit: Tomer Appelbaum

Rami Levy, Israel’s discount-supermarket king, on Sunday made a bid to buy control of airline Israir, offering a low bid that bondholders of its parent company are likely to reject even as the airline industry has been laid low by the coronavirus.

BGI Investments, a publicly traded company controlled by Levy and his brothers Shalom and Dror Haim, offered to pay 70 million shekels ($20.5 million) for the airline as well as take over a $5 million loan Israir made to IDB Development Corp.

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Although supermarkets and airlines are very different businesses, the two companies have cooperated in the past in marketing Israir routes to Baku and Tirana. Both are low-priced competitors to leading rivals and share the same philosophy of keeping management overhead low. In the past Israir even called itself “the Rami Levy of the airline industry.”

However, sources said it seemed unlikely right now that IDB Development bondholders would accept the offer. They won control of IDB last week after a court appointed a trustee to manage an asset sale of the indebted holding group.

Bondholders regard the $25 million valuation for Israir implied in the offer as too low, and aren’t happy it contains no future milestone payments that would take into account the airline’s growing valuation, as business recovers from coronavirus travel restrictions. BGI is expected to either raise the price or add convertible bonds to the mix.

Meanwhile, Eduardo Elzstain, who controlled IDB until last week, has sought to regain part of the holding group he lost. On Friday, he proposed to redeem the 70.2% stake in Discount Investment Corp., a sister company of IDB, from IDB series Yud-Dalet bondholders who pledged the stock as collateral.

Through his investment vehicle Dolphin Holdings, Elstzain offered to pay 770 million shekels now and another 138 million in another year for the shares. The bondholders are owed 890 million shekels.

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