Competition for control of El Al Airlines is heating up as a second potential buyer for Israel’s troubled flag carrier emerged.
Meir Gurvitz, an Israeli-British businessman whose holdings include the Israeli property company Arazim Investments, on Wednesday submitted a request to buy between 25% and 40% of the carrier’s shares.
The step he is required to take before applying for permission to hold a major stake in the airline from the government.
The offer puts him in competition with the Rozenberg family, a New York-based owner and operator of nursing homes and other health-related businesses. Ken and Eli Rozenberg last months offered to pay $75 million for a 44.99% stake in the airline and have received tentative approval from the Government Corporations Authority to control the airline.
The competing offer, as well as an apparent effort by Tami Mozes Borovitz to retain control of the airline, comes as El Al’s financial situation grows critical. It has suspended all flights due to the coronavirus pandemic and is contending with a huge debt, but a government rescue package has yet to be put into place.
El Al has retained the U.S. investment bank Jefferies to sell the shares in the United States, but sources said the airline will not meet an end-of-August deadline to sell $150 million in shares to the public. The share sale is a condition set by the Finance Ministry before it will agree to guarantee a $250 million bank loan the airline needs to stay afloat.
The El Al offering is ensnared by several problems, among them the government’s commitment to buy any shares the public does not buy. If it purchases the full allotment, the state could end up holding 61% of the airlines. The problem is that by law, if it amasses more than a 45% stake it must make a general offer to buy out the rest of the El Al’s shareholders.
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In addition, banks are hesitant to make the $250 million loan so long as the government is guaranteeing more than 75% of its value. Meanwhile, until El Al has signed an agreement to get the loan, the pacts on wage cuts and other cost-saving measures with labor unions won’t go into force.
All of these problems have complicated completing the share sale by the deadline, sources said.
El Al needs the proceeds from the offering to refund by the end of September some $80 million in tickets for flights that were cancelled due to the coronavirus. It also owes another $190 million to foreign ticket holders and has debts to banks and suppliers.
Gurvitz, 65, invests in real estate in Israel and Britain. Arazim, in which he has a 47.9% stake, was delisted from the Tel Aviv Stock Exchange several years ago after it failed to meet the minimum level of shareholders equity.
However, its bonds continue trading on the bourse. Its auditors placed an “going concern” warning on the company in its first-quarter report, noting among other things that its shareholders equity was a negative 52 million shekels ($15.3 million).
Despite El Al’s deep financial troubles, Gurvitz reportedly sees the agreements with the four workers’ committees that management has recently reached as turning the airline into an attractive investment.
Gurvitz’s attorney, Ronen Zitvar, on Thursday denied market speculation that his client is prepared to control El Al jointly with Mozes Borowitz, who controls the airline through the publicly traded company Knafayim. Zitvar said his client wasn’t rejecting any kind of ownership arrangement out of hand, but said Gurvitz hadn’t met with Mozes Boroviz and wasn’t coordinated any moves with her.