IDB Development on Its Way to Tel Aviv Stock Exchange Listing

Relisting would see IDB back on TASE after four-year absence, with new owners Eduardo Elsztain and Moti Ben-Moshe set to turn IDB Holding Corp. into shell company.

IDB Development Corporation, the holding company that is slated to become the company at the apex of the IDB group, is starting to seek regulatory approvals to list its shares for trading on the Tel Aviv Stock Exchange.

The listing would bring the company – which was delisted while Nochi Dankner controlled the group – back to the stock exchange, after a four-year absence.

Hagai Ullman and Eyal Gabbai, the court-appointed officials running the IDB group until investors Eduardo Elsztain and Moti Ben-Moshe formally take over, are seeking approvals for the offering from the Israel Securities Authority, as well as from the Communications Ministry and the Shin Bet security service – the latter two because of IDB Development’s controlling stake in Cellcom Israel, Israel’s biggest mobile operator.

The relisting process for IDB Development comes as Antitrust Commissioner David Gilo gave the go-ahead last Thursday to formally transfer control of IDB to the Elstzain/Ben-Moshe group. One element of the debt bailout that Elsztain/Ben-Moshe are undertaking entails flattening the IDB pyramid by, among other things, jettisoning IDB Holding Corp., IDB Development’s parent company.

A big question facing IDB as it reorganizes is who – if anyone – will benefit from the 389 million shekels ($110 million) of accumulated losses on the books of IDB Holding.

Under the current restructuring program, IDB Holding will be left as a shell company with a TASE listing whose losses could be used by anyone buying it to offset future tax liabilities, if the Israel Tax Authority permits it.

However, calls have recently been heard among some IDB Holding bondholders to award the tax benefits to them. They are arguing that, as part of the debt bailout now underway at IDB, they should be sold the shell company, which would entitle them to the tax benefits accrued from the losses.

However, Nir Halperin, head of tax studies at the accounting program of the Interdisciplinary Center in Herzliya, said he doubted whether anyone would be allowed to enjoy the losses.

“Any tax benefits from losses accumulated at IDB Holding will apparently offset any debt forgiveness created in the wake of the debt bailout for bondholders and the haircut they are forced to take,” said Halperin, who was formerly director of the capital markets unit of the Tax Authority.

“Therefore, there won’t be any tax credits for losses in the shell company after the debt arrangement is completed,” he said. IDB Holding would likely fetch 3.1 million shekels, the usual price for a TASE-listed shell company, he added.

Daniel Bar-On
Moti Milrod
Ilan Assayag