The contest for control of Bezeq, Israel’s biggest telecommunications company, took another surprising turn on Sunday when Internet Gold said it had received several offers to buy all or part of its shares in B communications, Bezeq’s parent company.
Internet Gold didn’t hint at who the potential buyers are, but sources said they included the giant U.S. private equity fund Blackstone Group, led by Steven Schwarzman with more than $430 billion under management. Another large but unidentified overseas fund is also among the suitors. As are several other Israeli and foreign groups.
In a brief statement to the Tel Aviv Stock Exchange, Internet Gold said the offers were either to buy its entire 65% stake in B Com or to buy part of the stake and become a strategic partner with it in control of Bezeq. B Com, in turns, has a 26.3% controlling stake in Bezeq.
“In view of the current market conditions, as well as the company’s assessment that the offers received seems to have a reasonable feasibility, the company’s management, together with the company’s Board of Directors, is currently examining the possibility of advancing any of the offers over the next two weeks and the feasibility of implementing a transaction,” Internet Gold said.
The news lifted the shares of the Bezeq group, which has been reeling under the combined impact of police and securities probes into Bezeq’s former controlling shareholder Shaul Elovitch and top executives and huge debt load that has forced Elovitch to cede his telecoms empire to creditors.
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Internet Gold shares soared 16% to close at 10.30 shekels ($2.89) while B Com finished 5.4% higher at 39.56 and Bezeq rose 2.15% to 4.29. Internet Gold’s Series Dalet bonds climbed 3.3%, which still left their yields at a painful 8.2%.
Successive efforts to gain control of Bezeq through Elovtich’s holding company, Eurocom, failed.
Last week, Internet Gold’s bank shareholders – who now control 55% of the company through Eurocom Communications after bailout offers fell through – were negotiating a deal with Keidan Dahari and Yaron Adiv, partners in the real estate company Tnuport, that would have enabled them to buy control of Internet Gold. The mechanism was a private placement the company plans shortly to raise badly needed capital.
Internet Gold’s CEO, Doron Turgeman, who is now leading the sale process with the B Com suitors, aimed to raise 90 million from the sale of shares and warrants in order to ensure his company could meet a 150 million shekels to bondholders next year.
The prospect of a deal to buy B Com shares changed the math favorably at least for Internet Gold bondholders, but not for the banks.
Sunday’s news lifted the value of Internet Gold stake in B Com by market capitalization is 770 million shekels. Since the prospective buyers are likely to pay a premium for control of the company, Internet Gold could stands to get as much as 1 billion shekels from the sale of its complete holding.
That would give it enough cash to repay its bondholders the 760 million shekels due them and leave the company with cash of between 280 million to 300 million shekels.
That would leave the banks with 170 million shekels for the 55% stake. That compares with the 400 million Naty Saidoff, the U.S.-Israeli real estate entrepreneur, was willing to pay for Internet Zahav, several weeks ago as part of his bailout of Eurocom Communications.
Eurocom Communications owes 800 million shekels to Israel Discount Bank, 600 million to Bank Hapoalim and 200 million to First International Bank of Israel.
That said, the banks can still extract cash from other parts of the Eurocom group, including 130 million from Enlight, an alternative-energy company (see story in The Ticker on this page).
Another 250 million shekels owed to a bank consortium led by Mizrahi Tefahot by Eurocom Real Estate, a sister company of Eurocom Communications, is supposed to be covered by the sale of a 55% stake in satellite operator Spacecom and a 37.5% holding in the Tel Aviv residential real estate project Midtown.
Any money left over from the asset sales after the Mizrahi group has been repaid are supposed to go to the Eurocom Communications creditors, but it is unlikely there will be any.