Koor Industries and Discount Investment Corporation shareholders both voted overwhelmingly yesterday to merge the two companies, a move that will generate cash for Nochi Dankner’s IDB group.
Some 99.9% of Koor shareholders backed the merger of their company into Discount, its parent company. They also approved an agreement that would give Koor bondholders better terms in return for agreeing to redeem the debt early.
Meanwhile, 98.4% of Discount shareholders backed the merger, which was expected after the investor-advisory firm Entropy Consultants had recommended the move.
The exact value of the merger will only be known once Koor has sold and collected dividends on its stake in Credit Suisse, which it has been divesting. Last week, the company said, it sold another tranche of 5.5 million shares in the Swiss lender for NIS 600 million.
Shares of Koor closed down 1.5% to NIS 70.38 in Tel Aviv Stock Exchange trading yesterday. Shares of Discount Investment gained 2.6% to NIS 22.16, while those of its parent company, IDB Holding Corporation, gained 0.4% to NIS 7.09.
IDB Holding owns a 13.4% stake in Koor, which will entitle it to more than NIS 400 million in cash from the merger. The public owns just over 19% of Koor and Discount the remainder.
Once one of Israel’s most powerful conglomerates, in recent years Koor has shrunk to a small part of Dankner’s beleaguered IDB group. The sale will put some NIS 460 million into IDB Holding, the company at the top of the Dankner pyramid, to repay debt coming due.The next stage in the merger comes October 28 when a court will be asked to approved a reduction in Koor’s capital.
The latest sale of Credit Suisse shares, meanwhile, leaves Koor holding 20 million shares, or 1.26%, of the Swiss bank, , with a market value of 571 million Swiss francs, or NIS 2.18 billion. Last Monday the company said it sold 5.5 million shares for an equivalent sum. Koor will record a NIS 149 million gain on the 11 million shares sold in its third-quarter financial reports.
Koor used the nearly 160 million Swiss francs in proceeds from the most recent sale to pay off 62 million Swiss francs in loans from Morgan Stanley and Citigroup, which had financed the purchase of the stock. Another 62 million Swiss francs of the loans was repaid previously from proceeds of the earlier bloc of shares sold.
The balance now owed to the two banks is 218 million Swiss francs, equivalent to NIS 833 million, backed by 19.32 million in Credit Suisse shares. Koor has said it plans to sell off the rest of its stake in Credit Suisse in advance of the merger.
The gain on Koor’s remaining Credit Suisse holdings over their reported June 30 book value amounts to NIS 272 million.
The Credit Suisse investment was one of IDB group’s biggest gambles over the past few years. Koor initially recorded gains of NIS 3 billion in the stock, but later posted losses of a similar size.
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