No Deal

Bush Brother Drops Bid for Debt-ridden Israeli Conglomerate

Race for Nochi Dankner's IDB Group takes dramatic turn as Neil Bush, brother of George W. Bush, drops out; others sweeten offers.

The race for control of one of Israel's biggest conglomerates, Nochi Dankner's IDB group, took some dramatic turns Sunday as the deadline for offers expired. Neil Bush, brother of former U.S President George W. Bush, dropped out of the running, the Danker group added a new partner and the Argentinian businessman Eduardo Elsztain raised his offer by NIS 100 million to NIS 805 million - but with new strings attached.

Neil Bush's group, which entered the race only last month, said it would not place the required NIS 70 million in so-called earnest fees ( a security deposit) required by the court overseeing IDB.

Bidders were required to deposit the money by 12:00 p.m. on Sunday.

Bush's American Pacific International Capital said in a statement that, after depositing $20 million with the court and conducting due diligence, it had come to the conclusion that the investment wasn't sufficiently attractive.

"The main considerations behind the decision involve the structure of IDB, the group's leverage, concerns about being exposed to lawsuits and the business and legal uncertainty due to the lengthy interim period before an arrangement can be completed," the group said.

Bush himself added that Israel presented extraordinary business opportunities and signaled that American Pacific would be exploring other possible investments in the country.

Bush's exit from the competition leaves the number of rivals for control of IDB, whose holdings include Cellcom Israel, Clal Insurance and Super-Sol, at three: The partnership between Danker and Ukranian businessman Alexander Granovsky, Argentinian businessman Eduardo Elsztain and Motti Ben-Moshe's Xtra Holding.

Shares of IDB Holding fell 4.3% to NIS 5.90 on the Tel Aviv Stock Exchange on Sunday. Its Series 4 bond rose 0.8%, while IDB Development' Series Chet bonds were unchanged.

Meanwhile Dankner introduced a new partner to the alliance with Granovsky: The Noiman family, the controlling shareholders of the Alon Group, which has holdings in the automobile sector, in real estate and in startup companies.

"As part of the Alon Group's strategy of expansion and entry into new segments, we have deiced to invest in the IDB group," Tzahi Noiman, the group's CEO, said in a statement. "We see significant potential in this transaction and are confident that we can realize the potential IDB group and its assets present, together with the other partners in the investment group." 

Under Elsztain's revised offer, NIS 2.15 billion of debt of IDB Development Corporation, a holding company near the top of the IDB pyramid, would be converted into shares, while the Argentinian injects NIS 550 million of cash into the company and another NIS 155 million to shareholders. That would leave him controlling 45.1% of IDB Development.

In the event that IDB succeeds in selling a stake in its Clal Insuance unit, Elsztain will transfer another NIS 100 million to IDB Development shareholders. If not, he will inject the money into IDB itself.

Elsztain, who is allied with investors holding bonds issued by IDB Holding Corporation, the company at the apex of Danker's group, had originally agreed to inject NIS 770 million into the group. NIS 700 million would go into IDB Development, giving him 46% of the company and bondholders 50.5% plus NIS 70 million in cash.

Kobi Gideon / GPO
Olivier Fitoussi