After a prolonged struggle, a company controlled by discount-supermarket king Rami Levy and his partner Shalom Haim were on their way Tuesday to acquiring Israir, one of Israel’s three airlines, for 162 million shekels ($50 million) in cash and shares.
Seventy percent of the investors holding Series Tet bonds issued by Israir’s insolvent parent company, IDB Development Corp., voted in favor of the bid, which was made jointly by BGI, a company the two men control, and a firm controlled by Levy alone. The sale still requires the approval of lawyer Ophir Naor, the bondholders’ court-appointed trustee, and Judge Hagai Brenner, who is overseeing IDB’s unwinding.
Levy and Haim are gaining control of an airline hit hard by the restrictions on global travel due to the coronavirus epidemic. Nevertheless, the two see room for synergies between air travel and supermarkets once global aviation recovers.
The outlines of the synergy strategy were revealed Monday when Rami Levy’s eponymous, publicly traded supermarket company said it had been given an option to buy a 24% stake in Israir in the next 90 days for 39 million shekels in cash – the same valuation as Israir is being acquired now – as well as an option to establish a loyalty program with Israir similar to rival El Al’s Fly Card.
Under the plan, points earned from shopping at Rami Levy supermarkets could go toward flights and organized tours. Members would also be eligible for discounts on duty-free goods sold in-flight.
Stock market investors gave the deal a vote of confidence: The price of BGI shares spiked more than 70 percent on the Tel Aviv Stock Exchange to 1.51 shekels. Rami Levy shares gained 3.9 percent to 226.50 shekels.
Under the terms of the Israir acquisition agreement, bondholders will receive 121.5 million shekels in cash and a 25 percent stake in the airline. The bondholders have a two-year option after completion of the acquisition to sell the shares back to BGI and Rami Levy for 40.5 million shekels in cash.
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Levy and Haim beat out bids by Yigal Dimri through his firm Dimri Investments and by Moti Ben-Moshe’s Dor IDB Alon holding company.
Dor Alon had successfully appealed to the Supreme Court to reverse Brenner’s earlier approval of the Levy-Haim bid on technical grounds, leading to this week’s second round of bidding that ended with Levy-Haim winning the auction in any event.