Kardan NV (TASE: KRNV;AEX:KARD) seeks to expedite the sale of engineering subsidiary Tahal Group in order to avoid a confrontation with its bondholders. Kardan recently approached several local and foreign investment entities requesting proposals for buying Tahal. Some of these entities submitted initial non-binding offers, but for now they are far from the consideration that Kardan seeks to obtain.
According to market estimates, Kardan initially sought to sell Tahal at a valuation of at least €200 million, but it would now be willing to settle for just €150 million. Even this price has so far failed to excite investors, and it may be that in the end the price will be €100 million or less.
Kardan NV sees international engineering and infrastructure companies as potential buyers for Tahal, and, according to sources familiar with the matter, it received offers from two Chinese companies. Meanwhile, Kardan NV's representatives have also approached investment entities with local representation, chief among them Apax Partners and Fortissimo, in an attempt to generate competition in the bidding for Tahal and thus raise its price.
Given the acquisition history of these funds, however, it is hard to see them making especially high offers for Tahal. To judge from past experience, Apax and Fortissimo will not compete over Tahal, and will buy the company only if it is offered to them at an attractive price from their point of view.
Tahal is 98.4% owned by Kardan NV. It undertakes engineering projects in water and agriculture. In 2016 it saw a 23% drop in revenue to €130 million, but its gross margin improved to 16.2% from 14.9% in 2015. The remainder of Tahal's shares is held by the heirs of the late Amnon Lipkin-Shahak, who was IDF chief-of-staff, and served as chairman of Tahal.
Between February 2018 and February 2020 Kardan NV is due to repay its entire debt to its bondholders, amounting to NIS 1.25-1.35 billion. Under a previous debt settlement, proceeds from the sale of assets will be immediately applied to early repayment of its debt, and so the precise amount that it will have to repay depends on the amount of interest that accumulates up to the repayment date.
Published by Globes [online], Israel business news - www.globes-online.com - on April 20, 2017
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