Eduardo Elsztain could well become the controlling shareholder of the beleaguered Israeli business group IDB after all. On Monday night the Argentine Jewish investor and the Dolphin Fund proposed to invest NIS 700 million for a 51% stake in IDB Development Corporation, a central holding company in the IDB group.
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Agreement has been reached on the issue with the trustees for bondholders of IDB Holding Corporation, the company at the top of the group. The parties also agreed that the investors would purchase NIS 70 million worth of IDB Development shares from IDB Holding creditors.
The Elsztain deal values IDB Development at NIS 822 million.
Both sides to the deal agreed that no executive officeholder at the company would also serve as chairman of IDB Development's board of directors for four years. This will prevent Israeli tycoon Nochi Dankner, the controlling shareholder, from serving as company chairman.
The trustees will convene an urgent meeting of bondholders at a Tel Aviv hotel Tuesday evening to decide whether to approve the deal with Elsztain. Bondholders must also decide whether to instruct the trustees not to hold talks with other interested parties before the court managing the restructuring approves a distribution in kind of IDB Holding's assets, including shares in IDB Development. This will put a damper on an alternative deal proposed by Dankner and Ukrainian investor Alexander Granovsky, which values IDB Development at NIS 944 million.
Elsztain and the Dolphin Fund have already deposited $75 million as security on the deal and must deposit another $25 million within 14 days of a court approval of the proposal. As part of the agreement, the investors may transfer up to 25% of the shares they receive to third parties, which according to information provided to the trustees will likely be Jewish billionaires George Soros and Michael Steinhardt.
Elsztain previously invested $25 million in Ganden Investments, the parent company of IDB Holding. However, that investment appears to have been wiped out as part of the restructuring of the IDB group.