IDB Now Negotiating to Sell Clal Industries to Viola Fund

Talks to sell the firm to Livnat family have been halted.

The IDB group has halted negotiations to sell Clal Industries to the Livnat family and is instead negotiating to sell the company to the Viola private equity fund, it said yesterday.

The transaction in question is for a 40% controlling interest in Clal Industries. The numbers being discussed price the company at NIS 3.8 million, representing a 38% premium over Clal Industries' market cap on the Tel Aviv Stock Exchange yesterday morning.

Tali Cohen

IDB, which is controlled by Nochi Dankner, says it undertook before Viola not to negotiate the sale of Clal Industries to any other party for two weeks. At the end of December, IDB had advised investors that it was negotiating to sell Clal Industries to the Livnat family, which shares control over IDB with Dankner. The Livnats were looking at buying 36% of Clal Industries according to a company value of about NIS 3.6 billion, but the talks have broken down.

Viola is a private equity fund that was founded in 2008 as part of the Viola venture capital group. It is managed by four partners: Harel Beit-On, Osnat Ronen, Jonathan Kolber and Sami Totach, all experienced in investments and management. The fund focuses on mature private and public technology companies, but it doesn't scorn growth companies with global spans in other branches. Its modus operandi is to buy a big interest in the companies and get involved to spur their growth.

Since its establishment, the Viola fund has bought five companies: Amiad Filtration Systems, Aeronautics, Orad Hi Tec Systems, MobileAccess and AdsMarket.

If the transaction comes off, it could help IDB meet its liabilities. For the third quarter of 2011 the parent company IDB Holding posted a loss of NIS 1.76 billion because of heavy losses on the group's investment in Credit Suisse (through Koor Industries ), the need to mark down land bought in Las Vegas to build a giant casino (through Property & Building ), and diminished cash flow from mobile operator Cellcom and retail chain Super-Sol, the group's two big cash cows.

Spooked at the state of the group's leverage and liabilities, investors send yields on IDB Holding bonds as high as 20%, indicating lack of confidence in its financial robustness. At the present the bonds are trading at yields of about 15% - still not a level indicating firm confidence.

To shore up its liquidity, the IDB group has been negotiating to sell several assets. It tried for months to sell Clal Insurance to the European fund Permira but the talks fell through. Then it tried to sell Super-Sol to a group consisting of English property investor Leo Noe, and Matthew Bronfman and Shalom Fisher, who own a controlling interest in Discount Bank. That deal fell through too. Two weeks ago IDB reported negotiations to sell Clal Industries to the Livnat family, but that collapsed too. A report from yesterday has IDB now negotiating to sell Clal Finance to an unnamed foreign company.