Tel Aviv District Court Judge Ruth Ronen may have given Eduardo Elsztain, the controlling shareholder of IDB Development Corporation, a chance on Wednesday to avoid having to sell his Clal Insurance shares on the stock market.
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Ronen told all the sides involved in the forced sale of IDB’s 55% controlling stake in the insurer to reconsider the plan to sell the shares in 5% tranches on the stock market, which would yield a far lower price than if Clal were sold to a single buyer.
The court ruling comes after Dorit Salinger, the head of capital market, insurance and savings at the Finance Ministry, ordered Moshe Tery, the treasury-appointed trustee in charge of Clal Insurance, to begin selling shares every four months on the Tel Aviv Stock Exchange, starting this month.
Salinger acted after the last of a series of potential buyers, China’s Microlink, rescinded an offer to buy control of Clal, Israel’s second-largest insurer, after Salinger refused to grant it an insurance license. IDB lost its license to own an insurance company due to its heavy debt load.
But IDB Development as well as its creditor banks and bondholders who are owed some 3 billion shekels ($790 million) opposed Salinger’s plan.
Clal is trading at just 57% of its book value, or 2.43 billion shekels, valuing IDB’s stake at 1.34 billion shekels. That is far less than the 2.45 billion shekels Microlink had offered for the company, meaning IDB would get far less money to repay debt.
IDB Development shares rose slightly, to 79 agorot. Shares of Clal Insurance fell 3.1% to close at 43.92 shekels.
Ronen didn’t block the sale. Theoretically, Salinger could move forward with it because only the Supreme Court has the power to stop it, but that is unlikely.
Moshe Kiryati, a lawyer who owns IDB shares and bonds, had sought to block Salinger’s plan through a class action suit, arguing it would be better to distribute the shares as a dividend to shareholders.
While Ronen appeared unenthusiastic about Kiryati’s counterproposal she expressed more support for a plan proposed in court on Wednesday by Hagai Ullman and Eyal Gabay, who are acting as trustees for the IDB bailout.
They said the sale should be delayed and control of the process be transferred from Tery to IDB’s management with the help of outside advisers that would prevent any conflicts of interest. They expressed confidence they would be able to arrange a sale that values Clal at a premium to the market price.
Pini Rubin, the attorney representing IDB Development, urged the court to delay the sale for two years, saying that no matter what happened under the Business Concentration Law, IDB Development would have to sell Clal by 2019.