Shares in Koor Industries Ltd. (TASE:KOR), the investment company in IDB Holding Corp. Ltd. (TASE:IDBH), rose sharply today following reports yesterday that the company intended to change its investment strategy in the shares of Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ), in which it holds stake of about 2%. According to the company's announcement, it intends to realize its Credit Suisse shares on the stock exchange, or in off-floor transactions, in accordance with market conditions.
For more than two years, IDB and its chairman Nochi Dankner have taken criticism for the leveraged holding of Koor in the shares of the Swiss bank, a gamble that mainly caused it losses in recent years. Now, after three years in which Dankner refrained from selling the position, he has apparently decided that now is the time to do so.
Koor's announcement says that the move is being made "in view of the trend of recovery in the price of Credit Suisse in the past year", and also because of a possible merger transaction between Koor and its parent company, Discount Investment Corporation (TASE: DISI), a transaction that the company announced two months ago. Credit Suisse's share price has risen by 74% in the past year, and is currently at 28 Swiss francs.
Koor routinely revalues its holding in Credit Suisse. In the financial statements for the first quarter of 2013, the shares were stated to be worth NIS 3.25 billion. Since then, the value of the stake has risen by NIS 464 million, so that, over the five years since it started to invest in shares of Credit Suisse, Koor is ahead by a total of NIS 1 billion on paper, excluding finance costs on account of loans taken from foreign banks to finance the purchase, so that the overall profit is somewhat smaller.
The sale of Koor's Credit Suisse shares is expected to take place over several months. In any event, even if Koor sells its entire stake in the bank, because of its financial position it will not be able to distribute a dividend in the coming quarters to parent company Discount Investment, so that from this point of view there has been no improvement in the financial position of IDB.
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2013
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