FIMI fund buying into control of El Al

Ishay Davidi's FIMI will join the Borovich family in the controlling core of the carrier.

First Israel Mezzanine Investors Fund (FIMI), run by CEO Ishay Davidi, is in advanced negotiations to join the controlling core of El Al Israel Airlines Ltd. (TASE: ELAL) together with the Borovich family, and inject up to $60 million into the airline. The deal closes a circle for Davidi; he once worked as a security guard at El Al.

The deal will be implemented in several stages. FIMI will initially inject $5 million into El Al in exchange for 5.7% of the company. FIMI will also buy $5 million worth of shares from El Al's current controlling shareholder, Knafaim Holdings Ltd. (TASE: KNFM) at NIS 0.625 per share, 36% above El Al's closing price today of NIS 0.458. The price values El Al at $83 million.

In the second and main stage of the deal, FIMI will inject $30 million into El Al by August, against an additional allotment of shares at the same price which, after the allotment, will represent 25.5% of the company. The investment is subject to FIMI obtaining a control permit for El Al from the government, and reaching a collective agreement with the airline's 6,000 employees satisfactory to FIMI.

If FIMI goes through with the deal, it will receive two options. The first is to invest $10 million for an allotment of shares amounting to 7.56% of the company at NIS 0.65 per share. The second will enable it to invest a similar sum and receive a 4.7% slice at NIS 1 per share. If FIMI exercises these options, it will reach a total stake of 42%. After completion of the first two stages of the deal, FIMI will have a 30% stake, while Knafaim will be reduced to a minority stake of 24%.

El Al, managed by Eliezer Shkedi, is going through a challenging period, given the competition in the industry and the regional situation. Its share price has dropped 72% in the past two years.

"It doesn't matter who the new owners are, the El Al workers committee will do everything to look after the workers and their rights," El Al workers committee chairman Asher Edri told "Globes" yesterday, in response to the emerging deal.

"We have always said that in order to rehabilitate, streamline and really improve the company, the owners must inject capital, but we met with opposition," Edri added. "We are therefore happy to hear the outline deal as reported. We welcome any owner who comes along and wants to invest money. Of course we will sit with him and present our demands. It doesn't matter who the owners are, all we want is to earn a decent living."

El Al's management is currently conducting negotiations with the workers on a new collective agreement, after the previous one expired at the end of 2012. "The negotiations with the management are at the feeling out stage at the moment. There were some management demands that we did not agree with and objected to, particularly the demand that streamlining measures should mainly some from the workers' side," Edri said.

Published by Globes [online], Israel business news - www.globes-online.com - on January 31, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

Published by Globes [online], Israel business news - www.globes-online.com - on January 31, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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