Zohar Levy moves to head off Jerusalem Economy bid

Zohar Levy  photo: Tamar Matzafi
Zohar Levy photo: Tamar Matzafi

In response to the Saidoff brothers' offer for 30% of Jerusalem Economy, Levy's Summit Real Estate is offering to buy half its stake in Industrial Buildings.

Summit Real Estate Holdings Ltd. (TASE: SMT), controlled by Zohar Levy, seeks to head off the takeover bid for Jerusalem Economy Ltd. (TASE:ECJM) (JEC) by US-based brothers Ofer and Naty Saidoff. Yesterday, Summit, the largest shareholder in Jerusalem Economy, made an offer to buy from the company 39.17% of its subsidiary Industrial Buildings, and to sign an agreement with it on joint voting and control in Industrial Buildings. Levy stresses however that management of Industrial Buildings will be in the hands of Summit, and in exchange he himself will resign from the board of Jerusalem Economy.

Jerusalem Economy currently holds 78.36% of Industrial Buildings, so the offer is for half of its stake. Under the terms of Summit's offer, the consideration for the Industrial Buildings shares will be calculated on the basis of the latter's shareholders' equity, adjusted for its holding in Svitland (the Jerusalem Economy group's arm operating in real estate in Ukraine and Belarus). The consideration is estimated at NIS 600 million.

Summit currently holds 19.4% of Jerusalem economy, but cannot expand its holding beyond 25% because of the restrictions in the Business Concentration Law. These prevent a public company in Israel from buying a group with two layers (or more) of public companies in Israel, since in that event it will become a pyramid with three layers of public companies, which is forbidden under the Business Concentration Law (existing pyramid structures must be dismantled by the end of 2019).

Summit is currently involved in the management of the Jerusalem Economy group through its controlling shareholder, Zohar Levy, who serves as a director on the Jerusalem Economy board (alongside two other directors on his behalf), but the offer to purchase by the Saidoff brothers this week, NIS 533 million for 30% of Jerusalem Economy, changed things for Levy and forced him to choose between accepting the offer and holding onto the shares in Jerusalem Economy with the risk of becoming a minority shareholder if the offer is accepted.

Instead, Levy chose a third, surprising move by making an offer to Jerusalem Economy that would remove some of its best assets from its control, making it less attractive for potential new controlling shareholders.

Levy has given the Jerusalem Economy board a month to consider his offer before it expires. In its notice to the Tel Aviv Stock Exchange, Summit says it believes it has the capability, the means, the experience and the know-how to generate added value for Industrial Buildings and hence for Jerusalem Economy which, as mentioned, will continued to hold 39.17% of Industrial Buildings.

Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Zohar Levy  photo: Tamar Matzafi
Zohar Levy photo: Tamar Matzafi
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