Business in Brief: Tel Aviv Shares Eke Out Gains as Bezeq Group Sinks

Israel Chemicals suing IBM for $300 million for allegedly faulty computer project ■ Negotiations to sell Osher Ad grocery chain to Apax said to hit snag

FILE PHOTO: A stock market ticker in the  Tel Aviv Stock Exchange, Thursday, August 4, 2016.
Bloomberg

Hapoalim moving toward IPO of its Isracard unit in first half 2019

The odds are growing that Bank Hapoalim will divest its Isracard credit card unit through an initial public offering, with the balance of the holding being paid out to Hapoalim shareholders as a stock dividend. The two-stage divestment of Israel’s biggest credit card company will likely occur in the first quarter of next year, and no later than May. The plan comes as negotiations to sell Isracard to private equity funds Bain of the U.S. and Sky of Israel reportedly reached a dead end. Hapoalim is under government orders to reduce its holding in its credit card business to 40% by January 2020 and sell the rest a year later. Isracard is not expected to be valued at more than 1.3 billion shekels ($350 million), in part because an IPO means Hapoalim can’t demand a control premium. A stock dividend would be welcomed by Hapoalim shareholders, who were not paid a cash dividend in the past two quarters. (Michael Rochvarger)

Israel Chemicals suing IBM for $300 million for allegedly faulty computer project

Israel Chemicals is suing IBM for 1.1 billion shekels ($300 million) in damages it says it suffered from a failed computer integration project. In a suit filed in the Tel Aviv District Court Monday, ICL claimed that the U.S. tech giant failed at each stage of rolling out an enterprise resource planning system that was supposed to replace multiple systems is use by the company. It said that IBM systematically concealed the problems, delayed the implementation of changes requested by ICL and needless added to the cost of the project. After the problems became increasingly evident and posed a risk to its business operations, ICL’s board voted in September 2016 to end the project and its contractual relationship with IBM. “As a result of the failure of the project, [ICL] was forced to write off the full amount of its investment in the project, a huge sum of $300 million, $100 million of which was paid to IBM,” the suit said. ICL shares ended down 1.5% at 21.97 shekels. IBM said in response that it "believes this case has no merit and will vigurously defend it." (Yoram Gabison)

ILDC in talks to sell its Rimonim Hotels unit to Dan Hotels

Israel Land Development Company is in talks to sell its money-losing Rimonim Hotels chain to Dan Hotels, whose properties include the iconic King David Hotel in Jerusalem. ILDC said Monday it was seeking to sell its 83% stake in Rimonim’s parent, ILDC Hotels, at a 142 million shekel ($38 million) valuation — 32 million more than ILDC Hotels is valued on the Tel Aviv Stock Exchange. ILDC Hotels shares jumped 20.8% to close at 5.80 shekels. Despite record tourism to Israel this year, Rimonim lost 6 million shekels in the first nine months of the year, widening from a 5 million loss a year earlier, as revenues fell 14% to 157 million due to a drop in the number of properties it manages to eight. A hotel industry source told TheMarker that a merger with the much bigger Dan chain would help Rimonim reduce costs and return to profitability. “A hotel management company needs a certain level of volume,” he said. (Eran Azran) 

Negotiations to sell Osher Ad grocery chain to Apax said to hit snag

Negotiations for the Apax Partners private equity fund to buy control of the Osher Ad supermarket chain have hit a snag, sources told TheMarker on Monday. The two sides are at odds in the talks, which value the chain at up to 1 billion shekels ($270 million), over control. Zehavit Cohen, Apax’s CEO, insists her fund will have a majority stake while Oshar Ad’s three partners — Avraham Moshe Margalit, Aryeh Boim and Yehuda Landau — want to retain at least a 51% stake. The sources, speaking on condition of anonymity, said Apax had already completed due diligence of the deal before the three partners expressed reservations about how the chain would be managed under the new ownership. Osher Ad operates 18 supermarkets in Israel and one in Brooklyn catering to ultra-Orthodox shoppers and is expected to show 4 billion shekels in sales this year. Apax declined to comment. Osher Ad denied there have been any talks at all. (Eran Azran)

Tel Aviv shares eke out gains as Bezeq group sinks

Tel Aviv shares spent Monday drifting lower but managed to eke out a gain for the day by staying just above the minus line. The benchmark TA-35 index finished at 1,653.85 points, up 0.1% for the day, while the TA-125 advanced 0.1% to 1,491.08, on turnover of 1.15 billion shekels ($310 million). TowerJazz led the gainers on the TA-125, climbing 5.9% to close at 63.50 shekels. The chip maker said Korea Electrotechnology Research Institute had begun prototyping an integrated circuit based on a TowerJazz platform. Elbit Systems rose 0.5% to 468.50 after it announced it had been awarded a $112 million contract to supply an unnamed Asia-Pacific country with advanced airborne intelligence systems. The Bezeq group tumbled in the wake of police recommendations to indict Prime Minister Benjamin Netanyahu and others in Case 4000. Parent company B Communications dropped 6.3% to 31.59 and Bezeq itself lost 3.7% to 4.19. (Jasmin Gueta)