Tel Aviv District Court Judge Ruth Ronnen today authorized IDB Development Corporation Ltd. (TASE:IDBD) to sell 5% of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) by tomorrow in a private off-floor transaction, instead of in a tender for selling the shares that was supposed to conducted by Moshe Tery, the trustee for the 50% controlling interest in Clal Insurance. The sale will be a swap deal that will enable IDB Development to benefit from a future rise in the value of Clal Insurance shares, but which will impose a penalty if the shares lose value.
In the deal, IDB Development will sell 5% of Clal Insurance to a third party, apparently capital market trader Yossi Arad, who is involved in distributing the shares. The price of the swap deal will be determined by the parties, with mediation from Mizrahi Tefahot Bank (TASE:MZTF).
IDB Development owns 55% of Clal Insurance, 5% of which is attached in favor of holders of IDB Development's Series K bonds. Judge Ronnen ruled a month ago that the trustee should be begin implementing the plan set forth by Commissioner of Capital Market, Insurance and Savings Dorit Salinger for selling the shares by tomorrow. Under this plan, 5% of the shares will be sold every four months.
IDB Development opposes implementation of this plan in principle, believing that a later sale of the shares will fetch a higher price. The company is therefore still considering appealing Ronnen's ruling in the Supreme Court. At the same time, IDB Development is concerned that implementation of Ronnen's plan will generate downward pressure on the share price on the TASE.
For this reason, IDB Development has been searching in recent months for an alternative to a tender conducted by Tery. The company, together with the trustee, yesterday petitioned the court to authorize an agreement for the sale of the shares to a third party, and Ronnen granted the petition, after Salinger announced that she would not oppose the agreed method.
The petition was filed jointly by Advocate Shoney Albeck of the Fischer Behar Chen Well Orion & Co. law firm, on behalf of the trustee, and by Advocates Pinhas Rubin and Kfir Yadgar from the Gornitzky & Co. law firm, on behalf of IDB Development. Advocates Liav Weinbaum from the State Attorney's Office Tel Aviv District represented Salinger.
According to the current plan, the settling of accounts between IDB Development and Mizrahi-Tefahot concerning the difference between the sale price and the current market price shares will take place on May 4, 2019. If the Clal Insurance share price is higher than the price in the current deal, the bank will pay IDB Development the difference. If, on the other hand, the share price is less than in the current deal, IDB Development will have to compensate the bank by paying it the difference between the two prices.
The Clal Insurance share price responded to Ronnen's ruling by jumping 3% to NIS 59.60, reflecting a NIS 3.3 billion market cap. IDB Development will therefore receive NIS 165 million in the current deal. The Clal Insurance share has climbed 30% of the past year.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 3, 2017
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