Top Shareholder Eduardo Elsztain Might Take IDB Development Private

In a surprise move, the Argentine would ditch a planned share offering and delist the indebted conglomerate.

Moti Milrod

IDB Development Corp., the giant holding company with a raft of tattered subsidiaries, might be delisted from the Tel Aviv Stock Exchange, the company said Sunday.

IDB Development shares were suspended midday amid reports that its controlling shareholder, the Argentine property magnate Eduardo Elsztain, was pulling back from a plan to issue 500 million shekels ($128 million) in new shares badly needed to raise cash.

An hour or so after trading was suspended, IDB said talks were underway between Elsztain’s Dolphin investment vehicle and the attorneys Chagai Ulman and Eyal Gabbay, who were acting as trustees over an IDB debt-bailout plan.

A delisting would mark the latest twist in already complicated history for IDB, whose holdings include Cellcom Israel, Super-Sol and Clal Insurance – Israel’s biggest cellphone company, supermarket chain and insurer, respectively.

Elsztain acquired the group with Moti Ben-Moshe two years ago after Nochi Dankner lost control of it in a debt bailout. But Elsztain and Ben-Moshe quickly had a falling-out, and Ben-Moshe surrendered his stake.

IDB remains in serious financial trouble, with 700 million shekels of debt due to banks and bondholders, but investors made clear they approved of the plan. In the remaining hours of trading Sunday, IDB Development shares soared 44.8% to close at 1.40 shekels. As of press time, bondholder representatives had not reacted.

A delisting would relieve Elsztain, who owns about 82% of IDB Development, of his commitments to recapitalize the heavily indebted group under the bailout’s terms, amid demands by minority shareholders that he dilute his controlling stake. Under the bailout plan, he is required to buy 64 million IDB shares from minority shareholders for nine shekels each, more than five times Sunday’s close.

Instead, IDB said in a statement, Elsztain is proposing to the two trustees that he would put 500 million shekels into the company and be issued bonds, which he would then trade for stock held by minority shareholders and 128 million shekels in cash.

IDB shares would be delisted, but its bonds would continue trading on the TASE. In addition, IDB hinted that Elsztain might be angling to keep its 55% controlling stake of Clal Insurance.

Regulators want him to sell the insurer due to IDB’s shaky financial condition, but an agreement to sell Clal to China’s Microlink collapsed last month.

Under the plan being discussed between Dolphin and the IDB trustees, instead of paying 519 million shekels in cash to minority shareholders as required under the bailout plan, Elsztain would pay just a third of that. The rest would come equally from issuing more Series Tet bonds by IDB and from proceeds from the future sale of Clal Insurance.

The latter, IDB said, would depend on Clal fetching a price no less than 75% of its shareholders’ equity, or IDB’s receiving a “license for control” of an insurance company.

For the board to approve the plan to take IDB Development private, Elsztain will have to put more capital into the group beyond the hundreds of millions of shekels he has already injected. A 90-milion-shekel payment to Bank Hapoalim is due next month and hundreds of millions more to bondholders in June.