Two Top IBD Investors Absent From Key Board Meeting Due to Tensions

Argentinean investor Eduardo Elsztain and Moti Ben-Moshe, his Israeli partner in IDB, just can’t get on with each other, but the bondholders look safe.

A funny thing happened at a key meeting of IDB Development Corporation’s board last Thursday: One of the conglomerate’s two controlling shareholders failed to show.

Hagai Ullman and Eyal Gabay, the court-appointed trustees of the IDB Holding Corporation debt settlement, had called the meeting to discuss the liquidity situation and cash needs of IDB Development, which are becoming more and more critical as time goes by. The plan to list the company’s shares on the Tel Aviv Stock Exchange was also on the agenda, as were other issues.

Eduardo Elsztain, the Argentinean investor who became one of the IDB group’s two controlling shareholders in January, was supposed to participate via a conference call. Yet, in spite of the full agenda, he opted not to attend. Nor did his representative in Israel, Shaul Lapidot, who serves as an alternate director, nor did his Israeli attorneys.

Several of the participants attributed Elsztain’s absence to the anger that has been building up on his part with his new partner in IDB, Moti Ben-Moshe. “It looks as if Elsztain decided to boycott the meeting,” said a director who asked not to be identified.

Despite the developing acrimony, the Elsztain group is trying to ease tensions for now, a person close to the Elsztain group told TheMarker on Monday. “It is not a boycott. It wasn’t an especially important meeting and before it was held Elsztain and Ben-Moshe coordinated positions, and therefore they didn’t think it was important for his representatives to come,” he said.

However, those who know Elsztain and Ben-Moshe from up close have doubts. Considering the desperate shape it is in, there is no such thing as an unimportant meeting for IDB, the sources said. “We’re starting to miss Dankner,” said one of the parties involved in the debt settlement.

Elsztain’s absence from the board meeting is just one sign of the growing friction between the two, and could lead to a split between Elsztain and Ben-Moshe, observers say.

Board members say Ben-Moshe is the dominant one of the two partners, aided by his lawyer Yaniv Rog. Elsztain’s representatives tend not to speak at the board meetings.

Ben-Moshe has been heard to say that he controls IDB and that if Elsztain does not agree with his management methods, he can exercise the buy-me/buy-you mechanism in their agreement. “If there is a need, we will exercise it. I have enough money to buy his share,” he has been quoted as saying.

A BMBY clause, more commonly known as a shotgun or buy-sell agreement in the United States, is a method for partners to divorce in which each can buy out the other at the price the first one offers.

Spokesmen for Elsztain and Ben-Moshe issued a joint statement on Monday saying the two partners are working in close cooperation to carry out the agreement as soon as possible. They denied Ben-Moshe ever made the comments attributed to him concerning Elsztain.

Elsztain’s associates say Ben-Moshe’s statements disturb Elsztain. In an interview last month with TheMarker, Lapidot said the two have different styles. Ben-Moshe’s had an advantage because his mirrors the corporate culture prevalent in Israel, but against that, Elsztain and his team have much more experience with public companies like the IDB group.

“I think it’s not a question of if they will separate, but when − and who will buy who out,” a source involved in IDB told TheMarker a few days ago. “The bondholders are lucky − the money Elsztain and Ben-Moshe deposited, almost a billion shekels, is in a trust. It can only serve the [debt] agreement. So even if the partnership between them falls apart, the bondholders will not be hurt too much. They can take IDB Development with the money in the trust and sell it to someone else.”

The Elsztain group has delayed in signing the draft request to the European Union’s antitrust commission, which must sign off on the deal because of Ben-Moshe’s businesses in Europe. The two parties are also still in disagreement over the final closing date of the debt-restructuring agreement for IDB, and Elsztain seems to be less pressured about it. There are also disagreements on matters such as refinancing IDB’s debt and who will provide underwriting services.

“The time element is critical now,” said one source close to IDB. “Elsztain came to the debt restructuring agreement with a scar − because of the 100 million shekels he lost in [Nochi Dankner’s private company and owner of IDB Holdings] Ganden. It’s not surprising that he’s in no hurry to close the deal.”

Nir Keidar