IDB Is Planning Two Giant Investments Abroad via Koor

Dankner expected to wrap up purchase of Koor next week, after selling some Knafaim shares

IDB (TASE: IDBH) is planning two giant investments outside Israel through Koor Industries (NYSE: KOR), once that conglomerate's acquisition is complete.

Each deal should be in the region of $2.1 billion, said Nochi Dankner himself, the man who acquired the controlling interest in the sprawling assets group in mid-2003.

Dankner described his plans in a closed meeting with capital market elements, after agreeing in early May to buy the 35.4% controlling interest in Koor from Charles Bronfman and Jonathan Kolber for $446 million.

IDB will finance its acquisitions using its own equity and through yet more bond offerings. Possibly foreign partners may be brought into the transactions.

Under Dankner's direction, the IDB group companies have tapped the capital markets for tremendous sums. Koor can be expected to do the same, giving it more flexibility in its asset management.

Koor's shareholders' equity is $150 million and it is likely to sell $250 million to $300 million worth of assets that Dankner doesn't want it to keep.

The main asset expected to hit the block is an 8% interest in Elbit Systems (Nasdaq: ESLT), which is worth more than 8%. Offers for the shares have been showing up. Koor may also sell its shares in the Sheraton-Moriah hotel, but no decision has been made yet.

Elbit Systems stock

Koor is also expected to sell its 9% interest in Knafaim-Arkia Holdings (TASE: KNFM), which controls El Al (TASE: ELAL), at the behest of the antitrust commissioner. The Antitrust Authority is expected to shortly grant its blessing for IDB's purchase of Koor, within days in fact, contingent on Koor retaining no more than 4.9% of Knafaim.

The conflict of interest is that Knafaim controls El Al, as said, while through his privately held holding company Ganden (which controls IDB), Dankner has an interest in rival airline IsrAir. IDB cannot be in a position of owning stakes in competing airlines, the trustbuster has made clear.

The market expects IDB to close the purchase of Koor next week.

Dankner himself will probably subsequently serve as a director on the boards of ECI Telecom (Nasdaq: ECIL) and Makhteshim Agan Industries (TASE: MAIN), which are Koor's main shareholdings. He likes to be personally involved in the management of companies worth more than a billion dollars, which includes those two as well as Cellcom.