Africa Israel controlling shareholder Lev Leviev shocked the market on Monday with the announcement that he’d offered to buy the shares of AFI Development from the company, based on a $215 million valuation.
Africa Israel is in the middle of a creditors’ arrangement. It owes 3.1 billion shekels ($803.1 million) to bondholders. The company’s share gained 7% in trade Monday. It is down 36% so far this year.
The company and bondholders’ representatives asked the court to approve the sale by August 1 through an expedited process, and not through the usual procedure for shareholder transactions.
AFI Development is traded on the London Stock Exchange at a valuation of $133.5 million. Africa Israel holds 65% of AFI’s shares.
Africa Israel’s board of directors met on Sunday night to discuss the offer. Under the deal, Leviev will give Africa Israel 550 million shekels in cash in exchange for the 65% holding. That money would go toward early repayment of debt.
Bondholders would also be given the right to buy up to 10% of AFI’s shares within the next three years, at a price 30% above what Leviev is paying now.
Following the deal, Africa would write down a 2.5 billion shekel loss, the company told shareholders.
Currently, bondholders in two Africa Israel bond series have a lien on 85% of the company’s AFI shares. Therefore, the deal does not need the approval of Africa Israel shareholders, the company argued.
A bondholder stated that the proposal would not save Africa Israel from a debt settlement.
Another bondholder stated that it had always been an option for Leviev to buy Africa Israel’s assets, and that the bondholders hoped the deal would go through.
Meanwhile, AFI is facing a demand from Russian bank VTB for immediate payment of debts after the value of the subsidiary’s assets dropped sharply, taking the company’s share price with it.
AFI shareholders are scheduled to hold a meeting on August 1 to discuss a deal that would give VTB control of three real estate assets with a book value of $877 million, in exchange for forgiving the company’s debt.