IDB Subsidiary Doublechecks Price

The evaluation Discount Investments has ordered of IDB Holding Corporation, will confirm the value agreed on for the sale of the Recanati and Carasso families' stake in IDB Holding with buyers headed by Nochi Dankner and his partners Avraham Livnat and Yitzhak Manor, market sources say. The Recantis, Carassos and Dankners have agreed on a value of $840 million for IDB Holding and Discount Investment's 9 percent share will be valued at NIS 355 million.

The assessment was ordered from accountants Kesselman and Kesselman, independent assessor, Yitzhak Swari, and financial consultants Giza, after the sides agreed to cut the price from $1.05 billion to $840 million.

The assessments are slated to examine the $210 million price cut in view of the changes in the companies' finances since the deal was originally signed in May 2002.

Discount Investments is an indirectly-held subsidiary of IDB Holding, which is 71.5-percent held by IDB Development, which, in turn, is 58 percent held by IDB Holding. The valuation of IDB Holding was ordered as the deal was classified as a related-parties transaction, necessitating the authorization of Discount Investments board of directors auditing committee and shareholders meeting.

The audit committee is comprised of two external directors whose job is to protect the interests of minority shareholders who could be affected if the proceeds received from the sale of Discount Investments' shares is too low.

Market sources note that since the deal for 51.7 percent of IDB was originally signed at a valuation of $1.050 billion for IDB Holding, the situation of most of the company's subsidiaries has deteriorated. The main companies in its portfolio are Nesher Concrete, Cellcom, Azorim, Supersol and Clal Insurance.

Nesher has been hit by the slowdown in the construction sector and a fall in sales to the Palestinian Authority, although its situation has improved recently as a result of restrictions on concrete imports. Mobile phone operator Cellcom saw a 59 percent fall in net profits in Q3. The cellular market has reached saturation and the company is cutting back. Supersol published its third-quarter results last week and reported a drop in same-store sales and a 49 percent slump in operating profits. Since the beginning of the year, Supersol's share value has dropped 45 percent. Clal Insurance yesterday reported a significant drop in net profit as a result of writing down its holding in IDB Development; however, in general, the company's results have been positive and it is considered the only one of IDB Holding's principle companies whose situation has not worsened.

The deterioration of IDB Holding's major companies will lead the assessors to recommend Discount Investments accept the offer and sell its shares.

By taking over IDB Holding, Nochi Dankner is betting big on the future of the Israeli economy. If the economy recovers, he will rake in capital gains; but if the recession continues, he may come under pressure from the parties financing the deal and could end up in a similar situation to Salt Industries, which holds the controlling share in Bank Hapoalim.