(Update) Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) has sold another major asset. The company has signed an agreement to sell all of its 37.5% stake in Derech Eretz Ltd., the concessionaire of the Yitzhak Rabin Cross-Israel Highway (Route 6) toll road, to Israel Infrastructure Fund (IIF) for NIS 475 million. In addition, Africa-Israel will be repaid loans amounting to NIS 26.5 million that it extended to the concessionaire.
At the same time, Shikun u'Binui Holdings Ltd. (TASE: SKBN) of the Arison Group, which also holds 37.5% of Derech Eretz Highways, is buying the 25% stake in the concessionaire held by Canadian Highways Investment Corporation (CHIC) for NIS 300 million, and selling half of that stake (12.5%) to IIF for NIS 150 million. As a result of all these deals, Shikun & Binui and IIF will each hold 50% of Derech Eretz Highways.
Africa-Israel's pre-tax profit on the sale will be about NIS 200 million.
Africa Israel will continue to be a partner in Derech Eretz Management Corporation (the company that operates Route 6), with a 24.5% holding, and its subsidiary Danya Cebus Ltd. (TASE: DNYA) will continue to be a 33% partner in Derech Eretz Construction Joint Venture, the contracting partnership, which is the main contractor for the road and is currently carrying out widening work on it.
Africa-Israel CEO Izzy Cohen said that the proceeds of the sale would enable Africa-Israel to make early repayment of short-term notes due in June 2012, and would help the company to grow. Cohen commented, "The agreement for the sale of the Route 6 holding represents a further example of Africa-Israel enhancing an asset that it owns and realizing it, while generating high cash flow and posting a handsome profit."
Completion of the deal is subject to approval by the state, the lending banks, the Supervisor of Insurance, and the director of the Antitrust Authority. It also depends upon Shikun & Binui of the Arison Group, which also holds 37.5% of Derech Eretz Highways, not exercising its right of first refusal on Africa-Israel's stake. If Shikun & Binui does exercise its right, the deal will be with it and not with IIF. IIF said that if Shikun & Binui exercised its right, it would buy the latter's stake as well, without this affecting the deal price.
IIF first invested in Derech Eretz Highways in January 2009, when it bought Derech Eretz mezzanine notes from institutional investors.
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2010
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