Ben-Moshe Asserts Rights to IDB Stock

Attorneys demand partner Elsztain turn over half of shares he bought in rights offering.

Eyal Toueg

The battle for control of the IDB group isn’t over.

Moti Ben-Moshe, who allowed his stake in IDB Development Corporation, the company that sits at the apex of the conglomerate, to be diluted to less than 16%, on Tuesday acted to buy back shares from his partner, Eduardo Elsztain.

In a letter, Ben-Moshe asserted that under the agreement the two signed governing their joint control over IDB, Elsztain would have to sell him half the 390 million shekels ($101 million) in stock Elsztain bought during a rights offering earlier this month. Doing so would restore Ben-Moshe’s status as an equal partner with Elsztain.

The demand marks the latest fight between the two investors, who wrested control of IDB about a year ago from Nochi Dankner as part of a bailout agreement for the indebted conglomerate. Under the terms of the bailout, the two have to inject hundreds of millions of shekels into the company to keep it afloat.

The prospect of further legal entanglements left IDB Development shares 3.25% lower in Tel Aviv Stock Exchange trading on Tuesday, closing at 1.58 shekels.

Elsztain’s attorneys rejected all of Ben-Moshe’s claims and said the two directors representing him on IDB’s board had until Thursday to resign now that he was no longer a controlling shareholder.

“Everything is being done to hide what can’t be hidden – that your client didn’t plan in the past and doesn’t plan today, or anytime in the future, to inject money into a company that urgently needs a capital infusion, apparently because Ben-Moshe lack faith in the business,” Elsztain’s attorneys Giora Erdinast and Ra’anan Kalir wrote.

Not only did Erdinast and Kalir assert that their client had the rights to half the IDB shares Elsztain acquired in the rights offering, but also a 12.5% stake in IDB Development that was held by Elsztain’s investment vehicle, Dolphin Holdings, and transferred to another company Elsztain controls domiciled in Uruguay.

They also pointed to a 35.7% stake in Dolphin that was transferred to a second Uruguayan company, which Ben-Moshe alleges is controlled by other investors.

Ben-Moshe valued the stock he has the rights to at 300 million shekels. If he were able to get a hold of it, this would leave him in control of IDB with a 61% stake to Elsztain’s 10%.