Embattled Tycoon Offering Entrepreneur Shared Control of Israeli Telecoms Titan

Move comes as Shaul Elovitch comes under pressure from banks over debt

Shaul Elovitch
Eyal Toueg

Under pressure from his bank creditors over 1.2 billion shekels ($330 million) in debt, telecoms tycoon Shaul Elovitch has put out feelers to bring inYaakov Engel as a joint controlling shareholder in Bezeq, Israel’s biggest telecommunications group.

Via intermediaries, Elovitch has approached Engel with a proposal to buy a stake in either Internet Gold or B Communications. Elovitch’s closely held Eurocom group, which owes the debt, holds 60% of Internet Gold, which controls 64% of B Comm, which in turn controls 26.3% of Bezeq.

A spokesman for Engel – a 68-year-old entrepreneur who made his fortune in residential construction – declined to comment on what he termed “rumors.” But sources said Engel is examining the proposal and hasn’t made any decision.

Elovitch has also approached other Israeli and overseas investors with a similar offer. They would have to control sufficient capital and be able to pass muster with the Communications Ministry, which would have to clear them for a communications license.

Elovitch has come under pressure from his bank creditors after shares of the Bezeq group tumbled in the wake of an Israel Securities Authority probe that first surfaced in June. Shares of Bezeq companies have fallen as much as 50%, leaving Eurocom with a net asset value of somewhere between nil and a minus 200 million shekels.

Internet Gold is now trading at a market capitalization of 537 million shekels and B Comm at 1.62 billion, but sources said Elovitch believes that greatly understates their real value and is seeking premiums of tens of percent on the market price.

When talks began over a debt accord, the banks assumed it would take Elovitch two or three years to find a buyer for Bezeq shares because of the regulatory complications involved. Instead, Elovitch has begun working already.

The biggest of the creditors is Israel Discount Bank, which is owed 500 million shekels followed by Bank Hapoalim with 400 million. Mizrahi Tefahot Bank and a group of institutional investors, including Psagot Investment House and Clal Insurance, are owed another 265 million by Eurocom’s real estate arm.

Engel moved from Israeli home construction into Eastern European real estate, but bailed out in 2007 by selling his Langa Holdings just before the market crashed. Today he is involved in urban renewal projects through his Engelinvestbut most of his recent profits have come from mining concessions in Africa.