After a prolonged struggle, Nochi Dankner looked all but certain to be ousted from the helm of IDB group after its creditors on Sunday gave their backing to a plan by Argentine businessman Eduardo Elsztain and Moti Ben-Moshe for rescuing Israel’s biggest holding company.
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In a day of dramatic developments for Dankner and IDB, bondholders and banks cast more than 75% of their votes in favor of the Elsztain-Ben-Moshe proposal, the minimum needed for it to be approved. In doing so, they turned down a rival proposal by Dankner and his group, which was led by the Ukrainian businessman Alexander Granovsky.
“We are going to lead IDB in a new direction,” Ben-Moshe, an Israeli entrepreneur who leads the holding company Xtra Holdings, vowed after the vote. “We are going to bring value to shareholders, to creditors and to the Israeli consumer.”
The vote was the second by creditors on Sunday. In the first round, the Elsztain and Ben-Moshe proposal won 71% of the votes, four percentage points short of the required threshold for overcoming the offer made by the Dankner-Granovsky group.
But Bank Leumi, which had abstained in the first round, threw its support behind Elsztain-Ben-Moshe in the second, tipping the balance in their favor to come up with the needed 75% of votes.
Barring a surprise reversal, the vote brings an end to the Dankner era at IDB. He bought control of the holding company in 2003, putting him in charge of many of Israel’s biggest and best-known companies, among them mobile operator Cellcom and food retailer Super-Sol. But the onset of the global financial crisis in 2008 turned many of his investments sour, leaving him struggling to pay billions of shekels in debt he had run up.
In the last year Danker had mounted a campaign to retain control of the group, selling off parts of the IDB empire to raise cash and recruiting coinvestors to help fund a bailout of the group. In the end, one of those coinvestors — Elsztain — broke off the alliance and made his own offer.
In the final weeks the two sides had improved the terms of their offers — both of which involve a mix of putting new cash into the company and swapping debt for equity — while recruiting new partners and mounting media and Facebook campaigns to woo the creditor voters.
Despite the vote, Dankner vowed to continue fighting, saying the news about his loss of IDB was “premature” and that there was still a legal process ahead.
In the final hours, the tycoon fought hard to win over creditors or at least delay their decision.
Hours before the vote, creditors learned that IDB would be getting a significant cash injection after it announced that its Given Imaging unit (see story this page) was being sold at a $955 million valuation. Dankner hoped he could convince Eitain Orenstein, the Tel Aviv District Court judge overseeing the process, to delay the vote by one day to give creditors time to reconsider the vote based on the new development.
But the judge rejected the petition, allowing bondholders and IDB’s three creditor banks — Bank Leumi, Mizrahi Tefahot Bank and Switzerland’s Credit Suisse — to cast their votes by 6 P.M. local time, when the final creditors’ meeting was scheduled to convene.
Orenstein wrote in his decision that after reading Dankner’s petititon he concluded it should be rejected without any explanation since it was submitted just as the results of the vote were about to be released. Most of the votes had already been cast, he pointed out.
Further drama came from Leumi, which announced during the day that it would abstain in the first round of voting. IDB Holding Corporation, the company at the apex of the IDB group, is 120 million shekels ($34.1 million) in debt to Leumi.
“Leumi expresses in its vote its dissatisfaction from both offers tendered by the two buyer groups,” the bank said in a statement. “However, Leumi believes a quick solution needs to be formulated and a settlement reached for IDB Holding and IDB Development [Corporation] creditors. Therefore in the second round, if one is held, it will support the offer winning the most votes in the first round.”
Credit Suisse, with 135 million shekels of IDB Holding debt, voted in favor of the Dankner-Granovsky bid. The Swiss bank also has loans amounting to tens of millions of shekels outstanding to Dankner closely held investment vehicles Tomahawk Investments and Ganden Holdings. Aside from IDB Holding shares, it isn’t known whether Credit Suisse holds liens on any other assets.
Until recently Koor Industries, an IDB group company, held a 3% stake in Credit Suisse which it has now almost completely sold off. It wasn’t clear on Sunday whether the bank’s votes would be disqualified due to its extensive ties with Dankner and IDB group.