Yesterday, Jerusalem Economy Ltd. (TASE:ECJM) (JEC) reported that its board had decided to reject Summit's offer for its Industrial Building Corporation Ltd. (TASE:IBLD) shares.
At the end of August, Summit Real Estate Holdings Ltd. (TASE: SMT) offered to acquire half of the Industrial Buildings shares held by Jerusalem Economy. Summit's bid stated that the payment for the shares would be calculated on the basis of Industrial Buildings' shareholders' equity, adjusted for its holdings in Svitland Ltd. This meant that the estimated consideration was over NIS 600 million.
Summit currently holds 19.4% of Jerusalem Economy, but cannot expand its holdings beyond 25% due to the restrictions in the Promotion of Competition and Reduction of 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 law (existing pyramid structures must be dismantled by the end of 2019).
Instead, Summit controlling shareholder Zohar Levy chose a 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.
Published by Globes [online], Israel business news - www.globes-online.com - on September 12, 2016
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