Future of IDB Uncertain Again as Holding Company Transfer Delayed

Eduardo Elsztain may go it alone or seek new partner, as Communications Ministry investigates Ben-Moshe over potential Cellcom ownership.

Ofer Vaknin

The debt rescheduling agreement with IDB Holding’s creditors entered a dramatic new phase at Tel Aviv District Court on Wednesday, amid indications that the arrangement may be unraveling. One possible scenario would see Eduardo Elsztain – the Argentine-Jewish businessman – assume sole control of the company, rather than with Moti Ben-Moshe as initially envisaged.

The stakes in the case are high when it comes to control of IDB Holding Corp., the company at the top of the IDB group pyramid. The pyramid is the largest in the country and, until recently, was controlled by Nochi Dankner, who lost control amid a mountain of corporate debt. Control of the IDB group, which includes prominent fixtures on the Israeli scene such as Super-Sol (the country’s largest supermarket chain) and Cellcom (the cellular service provider), was awarded by the court to Ben-Moshe – an Israeli with major business holdings in Germany – and Elstzain several months ago.

The major stumbling block standing in the way of the court approving the transfer to the new controlling shareholders is that Ben-Moshe, unlike Elsztain, has not yet secured approval from the Communications Ministry for control of Cellcom. Sources close to Elsztain say he is eager to finalize the transfer, even if that means assuming control without Ben-Moshe.

The court-appointed trustees in the case had initially hoped to have the transfer finalized by the end of March (this coming Monday), but a lawyer for the Communications Ministry, Liav Weinbaum, dropped a bombshell of sorts Wednesday by announcing in court that the ministry was not currently in a position to approve Ben-Moshe’s control of Cellcom. In fact, the ministry’s investigation of the issue is expected to last several more months, he said, although Weinbaum insisted the ministry was working diligently to finish the investigation.

The probe includes the Shin Bet security service looking into Ben-Moshe’s sources of funding, and whether he has ties to enemy countries or other connections that would pose a risk to state security. Dankner, meanwhile, has long suggested possible improprieties in Ben-Moshe’s business operations, although an earlier investigation by the court-appointed trustees found nothing amiss to stop the transfer from proceeding.

Eyal Gabbai, one of the court trustees, reacted angrily to news of the delay due to the absence of ministry approval. “The State of Israel is playing with us. It’s chutzpah,” he said. “This shows that the state and its senior echelons are scuttling the IDB settlement.” In response, Weinbaum said he could share preliminary information on the findings of the investigation with the judge.

Then another court trustee, Hagai Olman, informed Judge Eitan Orenstein of another possible complication involving regulatory approval from the Tel Aviv Stock Exchange, related to IDB group subsidiary IDB Development and its financial reports.

Judge Orenstein ruled that the Communications Ministry needed to be given additional time to complete its investigation. He added, however, that time was of the essence and that Weinbaum’s suggested time frame was not reasonable.

One possible option at this stage would be to have the transfer of control of IDB Holding proceed, while shares of Cellcom would be temporarily placed with a trustee. That, however, would require the consent of both Ben-Moshe and Elsztain, and it’s not clear Elsztain would agree – out of concern that control of Cellcom would slip through his hands and the company may decline in value.

Furthermore, technically Cellcom is owned by IDB group subsidiary Discount Investment, meaning its shareholders and bondholders would have to approve such an arrangement. If Elsztain withholds his consent, he could opt instead to raise additional funds by himself or through new investors who would replace Ben-Moshe as an investor in the IDB group.