Is Elsztain pouring money down the IDB drain?

Tamar Koblenz

The deal gives Ganden a value of NIS 1 billion, when its only asset is a controlling stake in IDB, worth NIS 300 million with a debt of NIS 600 million.

Nobody underestimates Nochi Dankner's efforts in bringing an investor into IDB Holding Corp. Ltd. (TASE:IDBH), in which he is the controlling shareholder, or his connections in the business. Even so, the Ganden Holdings Ltd. - Eduardo Elsztain deal seems so strange that it is difficult to believe that it will actually happen.

IDB reported yesterday that the Argentinean businessman will inject $25-$100 million for 10-30% of Ganden's shares. The deal gives Ganden a value of NIS 1 billion, when its only asset is a controlling stake in IDB, which has a market cap of NIS 300 million as well as a debt of NIS 600 million to the banks. In other words, Ganden's value is negative.

Elsztain is presumably quite capable of making these simple calculations and can see these numbers for himself. Thus it is hard to understand why he is conducting these talks for a deal that is clearly not worth his while. Elsztain is an Orthodox Jew but it is not likely that he is putting his hand in his pocket for religious motives.

So why is he considering the deal? Maybe Elsztain believes that IDB's subsidiaries are an interesting investment opportunity and the right way to reach them is through the parent company. Or that if Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Shufersal (NYSE:SSLTF.PK; TASE: SAE) recover and Credit Suisse continues to rise and Makhteshim Agan Industries Ltd. again goes public after undergoing substantial enhancement following the ChemChina acquisition, then investment in the parent company will generate some value for him.

Elsztain could be seeing an investment in Ganden as buying an option in its subsidiaries, money that from his point of view might go down the drain. It is not known what exactly Elsztain is worth, but on the face of it an investment of $25 million or even more is a risk that he can afford. Another possibility, which seems more likely in the eyes of capital market and banking sources, is that the current talks, like those previously held by Daniel Amar and others, will end shortly after starting.

Altshuler Shaham Ltd. CEO and owner Gilad Altshuler put it well when he told "Globes", "IDB certainly wants to repay its debt, but there is a huge distance between wanting and reality."

Published by Globes [online], Israel business news - www.globes-online.com - on September 20, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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