Joint IDB Development Corporation Ltd. (TASE:IDBD) controlling shareholder Eduardo Elsztain is reaching out to his estranged co-controlling shareholder Moti Ben-Moshe in an effort to reach a compromise between them. While Ben-Moshe is demanding that Elsztain's shares be given to him, Elsztain is offering Ben-Moshe another opportunity to increase his stake in the company.
Elsztain is also accepting Ben-Moshe's demand for arbitration of the dispute between them, and has agreed to suspend his demand for changes in the IDB Development board of directors until they solve their differences. In a letter sent yesterday by Elsztain's lawyers, Adv. David Hodek and Adv. Eytan Epstein, to Ben-Moshe's lawyers, Adv. Raanan Kalir and Adv. Giora Erdinast, Elsztain wrote that he agreed to arbitration according to the controlling interest agreement they signed last year. He proposed that the proceeding be held with an prominent agreed arbitrator, for example a former Supreme Court justice or a District Court judge. He demanded, however, that the procedure define in advance that it be limited to 45 days. In addition, Elsztain demanded that Ben-Moshe state by next Sunday whether he accepted arbitration on these terms. Elsztain's first offer to Ben-Moshe is more interesting and challenging for the latter.
Up until recently, Elsztain and Ben-Moshe held equal holdings of 31.3% in the IDB Development controlling interest, following a joint NIS 1.4 billion investment in buying the shares and paying creditors of IDB Holdings, IDB Development's parent company. This picture changed, however, when the company held an offering of rights in early February. While Ben-Moshe did not participate, Elsztain paid and additional NIS 392 million of his own money to the company, thereby becoming the dominant controlling shareholder with a 61.5% stake and diluting Ben-Moshe's stake to 16.2%. A few days after this coup, Ben-Moshe demanded that Elsztain sell him 280 million shares and 230 million options for NIS 300 million, which would make Ben-Moshe the controlling shareholder in IDB Development with a 65% stake.
The demand was accompanied by three arguments, headed by the controlling interest agreement, which states that Elsztain is obligated to offer Ben-Moshe half of the shares and options purchased in the issue of rights at the same price paid by Elsztain, in other words, 130 million shares (22.7% of the company's capital) and 161 million options, for NIS 196 million. Ben-Moshe also demanded a right to buy additional shares and options (directly and indirectly), in view of the measures taken by Elsztain with various companies under his control, which allegedly give Ben-Moshe the right of refusal conferred on his by the IDB Development controlling interest agreement .
Through his lawyers, Elsztain definitely refused this demand. In a letter sent to his partner, he demanded changes in the board of directors in line with the new ownership situation. In response, Ben-Moshe said he wanted to exercise the arbitration mechanism in the agreement between them, to which Elsztain has now agreed. At the same time, however, Elzstain is voluntarily proposing that if Ben-Moshe wishes to buy IDB Development shares, he should do so directly from the company through a private allocation or some other means that will increase his holdings. In effect, Elsztain is giving Ben-Moshe a second chance to regain a leading role in the company and end the dispute between them peacefully.
The offer is for one week, but it is difficult to believe that Ben-Moshe will now change his attitude and invest more money in the company without becoming the person deciding the group's policy.
Published by Globes [online], Israel business news - www.globes-online.com - on February 26, 2015
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