Question Mark Hangs Over Who Controls Jerusalem Economic Corporation

Monday’s share offering created several big shareholders led by Summit Holdings.

Eliezer Fishman
Ofer Vaknin

Who is going to control Jerusalem Economic Corporation, the beleaguered real estate company once owned by tycoon Eliezer Fishman?

Early in the week it looked like it would be an investor group led by Shlomo Nehama, the former chairman of Bank Hapoalim, who reached an agreement to buy Fishman’s stake in JEC from Bank Leumi, which holds the shares as collateral against a bad loan.

But on Monday, Summit Holdings, a property company led by Zohar Levy, emerged as the biggest shareholder in JEC after it snapped up a 16.6% stake via a secondary share offering.

David Fuhrer, who controls the drug company Neopharm, came out of the offering with an 11% stake, while the investment house Altshuler Shaham accumulated a 12% holding. The insurance company Phoenix, meanwhile, boosted its interest in JEC to 13%.

Fishman himself still retains an 8% stake, which is held as collateral to other banks and retains the title of chairman at two JEC subsidiaries – Mirland and Darban.

Meantime, JEC’s fortunes have improved. At 5.91 shekels ($1.52) a share, the offering valued JEC at 1.45 billion shekels, a level its share price almost matched after they soared yesterday by 11.7% to 5.81 shekels. Its bonds also rose as much as 3.5%, cutting its yields, depending on the series, to between 3.4% and 6%, levels low enough that JEC could opt to recycle some of its 1.9 billion shekels in bond debt.

Levy, who built Summit by buying distressed real estate, mainly in Germany, apparently had been talking with Yaron Bloch, who heads the Leumi Partners, the unit responsible for selling Fishman’s JEC stake. He couldn’t decide the best route for investing in the company but chose to wait until the institutional tranche of the offering was complete before he acted. He then bested Nehama’s offer by a wide margin.

Levy is now talking to Leumi Partner about buying all or part of the collateralized shares, which, after being diluted in the offering, now equal 13.5% of JEC.

The catch is the Business Concentration Law, which bars multiple tiers of publicly-traded companies and would prevent him from wresting formal control over JEC.

He could solve the problem by reach an understanding with JEC’s other big shareholders. But Fuhrer is also talking to Leumi Partner, although he will face the same obstacles at Levy.