Real estate company Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT) controlled by Mordechay Zisser today sold subsidiary Elbit Trade and Retail Ltd. and all its holdings GAP Inc. franchisee GB Brands LP to swimwear maker Gottex Models Ltd. for NIS 26 million plus the value of the GAP franchisee's inventory as of the closing date, estimated at NIS 14 million, for a total of NIS 40 million.
The Antitrust Authority has to approve the sale. Gottex already holds the Zara franchise for Israel.
Elbit Imaging will keep its Mango brand retail operations in Israel. Mango operates 25 stores in Israel, and the company said its financial results have greatly improved in recent months.
Yesterday, Excellence Investments Ltd. analyst Amir Arad warned, "Elbit Imaging is at high risk of insolvency beginning in 2013." In a review entitled, "Winter is coming", Arad ripped to shreds media reports that the company's condition was improving following the upcoming sale of its interests in US mall operator EDT Retail Trust, which should generate hundreds of millions of shekels.
The reports about an improvement in Elbit Imaging's business condition aimed at countering the snowballing of negative reports that began with an exposé by "Globes" in May 2011, which revealed that Europe Israel (MMS) Ltd., through which Mordechay Zisser controls Elbit Imaging could not repay a NIS 1 billion loan to Bank Hapoalim (TASE: POLI). Zisser took the loan to acquire Elbit Imaging, and its shares were the collateral. These share are currently worth just NIS 136 million.
Elbit Imaging is due to repay bondholders NIS 300 million in 2012, and pay an additional NIS 140 million in interest payments to the banks. The company's need for cash has caused it to aggressively try and sell assets, but the ongoing global economic slowdown, and reports about the company's troubles, have hurt its ability to get good prices for them.
"There was no material change in the company's quarterly cash flow. Elbit Imaging has not been able to narrow its operating loss, development costs, or its high overhead, which weigh on the company," says Arad. The company's shareholders' equity is eroding, reducing its capital-to-balance sheet ratio to a nadir of 5.2% at the end of September.
As for the talks for the sale of EDT to Blackstone Group LP (NYSE: BX) at a profit of hundreds of millions of shekels, Arad says, "EDT's value is $576 million, so a deal at a company value of $590 million would result in a negligible gain of $3 million each for Elbit Imaging and Plaza Centers." (Elbit Imaging and its subsidiary Plaza Centers NV (LSE:PLAZWSE:WLZ) each own 22.7% of EDT).
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2012
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