After two false starts, Delek Group, the holding company controlled by embattled tycoon Yitzhak Tshuva, agreed over the weekend to sell its 70% stake in a subsidiary that controls 238 filling stations and 195 convenience stores for 525 million shekels ($154.6 million) to a group of investors.
The buyers – which had initially included discount supermarket magnate Rami Levy – are Lahav LR, a real estate company with properties in Israel and Europe, and Uri Mantzur, a former owner of the Hapoel Jerusalem basketball team and a real estate investor. Each will acquire 35%, half of the 70% stake. Delek will retain the remaining 30%.
Delek Group shares, which had lost nearly 90% of their value this year as the company struggles to meet debt payments, ended 3.7% higher at 66.99 shekels on the Tel Aviv Stock Exchange. Shares of Lahav LR, which is controlled by Avi Levy, Eli Lahav and Ilik Rozanski, soared 198.% to 2.88 shekels.
The deal reached over the weekend values Delek Israel at 750 million shekels. However, before the agreement was completed, Delek Group took out a 150 million shekel dividend from the company, so that its value for Delek Group is 900 million shekels – the minimum for which it had promised bondholders it would divest the business.
Tshuva has been selling off assets for cash to repay debt it ran up buying North Sea oil and gas assets at a time when global energy prices were sinking. Tshuva has sold land, as well as stakes in water-desalination company IDE Technologies, real estate developer Chen Development and citrus grower-exporter Mehadrin, raising 3 billion shekels. It has also sold stock to the public, diluting Tshuva’s stake in Delek Group to 53%.
The 500 million shekels in net proceeds from the Delek Israel sale will enable Delek Group to repay the remaining 342 million shekels its owes banks. That in turn will allow Delek Group to transfer the 40% of its Delek Drilling unit – which owns states in the Leviathan and Tamar offshore natural-gas fields – now pledged as collateral to the bank as security on 5.8 billion shekels of debt to bondholders. Those shares currently have a market value of about 1.57 billion shekels.
In about two weeks, Delek is scheduled to complete the sale of $180 million in bonds backed by so-called super royalties from Leviathan. Between that and the Delek Israel sale, Delek Group will have the cash to cover 500 million shekels in debt repayments coming due before the end of this year.
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Rami Levy, who had been interested in the synergy between his supermarkets and Delek’s Menta convenience stores, dropped out of the bidding under pressure from Haredi activists. They had threatened to mount a boycott of his Rami Levy supermarkets in protest over his taking an ownership stake in the Menta stores, which are open on Shabbat.
Delek Group then reached a complicated deal with Arbel Finance, a private equity and debt fund managed by Amir Hessel and Gabi Low. Under it, Arbel would have lent Delek 450 million shekels, enabling Delek to retained control of Delek Israel. Bondholders objected to the terms, which they feared would give Arbel as a creditor preference over themselves.