IDB Development Corp. bondholders voted overwhelmingly late Tuesday to sell control of IDB’s sister company, Discount Investment Corp., to an investor group led by real estate company Mega Or.
A competing bid by Eduardo Elsztain, the Argentine property magnate who sought to retain control of Discount from its creditors, elicited almost no support even though his bid similarly valued Discount at about 1.35 billion shekels ($400 million).
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The three classes of IDB bondholders gave between 90% and 99% of their votes in favor of the Mega Or bid, according to a statement to the Tel Aviv Stock Exchange on Wednesday by Discount. The sale still requires the approval of Tel Aviv District Court Judge Hagai Brenner, who is managing the Discount sale.
If he approves, Mega Or will get control of a holding company whose assets include Cellcom Israel, the country’s biggest mobile provider; real estate company Property & Building; the tech investment company Elron; and the citrus products concern Mehadrin.
Shares of Discount Investment closed 6.4% higher on Wednesday at 7.98 shekels, boosting its market capitalization to 1.13 billion shekels.
Elsztain, who, since he gained control of the IDB group, had spent some 3 billion shekels trying to revive its businesses and repay the huge debt he inherited buying it, had fought hard to retain Discount. But IDB bondholders, who had been pledged 70% of his 82% in Discount as collateral, expressed doubt about his ability to come up with the required cash to buy the shares.
Bondholders also expressed a lack of confidence in Elsztain while saying that Zahi Nahmias had the financial resources. His partners in buying Discount are the investment bank Value Base, Clal Insurance and a group of private investors.
Discount Investments itself carries 3.5 billion shekels of debt, but the Nahmias group has said it is confident it can enhance the value of its holdings, especially Property & Building, which holds a 30% in the property company Gav-Yam. The group is expected to divest Discount’s non-property holdings to help repay Discount’s debt.
Nahmias’ plans to use Property & Building’s huge cash holdings to gain control of Gav-Yam have been undercut by Aaron Frenkel. Since Nahmias made his original bid for Discount, Frenkel has amassed a 35% stake in Gav-Yam, making him the company’s largest shareholder.
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Despite that, Nahmias went ahead with his Discount bid, hinting that he planned a showdown with Frenkel. It appears the two will try to build up their stakes, for instance by competing to buy shares held by institutional investors like Clal Insurance.