The battle for the assets of Africa-Israel Investments Ltd. (TASE:AFIL) is heating up again. After Moti Ben-Moshe unexpectedly submitted a bid last Friday to acquire Africa-Israel's holdings in its Africa-Israel Properties Ltd. (TASE: AFPR) subsidiary and in the company that operates Highway 6 and the Carmel Tunnels, the holders of Africa-Israel's bonds convened yesterday to discuss the new bid. At the same time, the trustees for the bonds postponed the vote on the various bids from Monday to Tuesday, and changed the proxy statements accordingly.
Africa-Israel, owned by Lev Leviev (48%) and the public (52%), owes NIS 3 billion to its bondholders that it is unable to pay. Ben-Moshe made his bid for the company's assets through companies under his control. He says that his offer will quickly give the bondholders half of what they are owed.
The main bid was submitted by Alon Holdings Blue Square - Israel Ltd., which Ben-Mohe fully owns. He offered to acquire a 56% controlling interest in Africa-Israel Properties for NIS 1.25 billion in cash plus two options likely to increase the proceeds from the deal by NIS 80 million. Isaac Idan, CPA, the economic advisor for the bondholders' representatives, estimated the value of the options at NIS 40 million.
At the same time, Dor Alon Energy in Israel (1988) Ltd. (TASE: DRAL), controlled by Alon Holdings Blue Square, offered to acquire Africa-Israel's 36% stake in Derech Eretz Highways for NIS 150 million, NIS 5 million more than the estimated value of the holding according to the asset valuation performed by Idan.
Amos Luzon told the bondholders yesterday, "I came to submit a bid for Danya Cebus Ltd. (TASE: DNYA) and Africa-Israel Residences Ltd. (TASE:AFRE). My bid is simple and binding, and is contingent only on approval by the Antitrust commissioner. I am offering to buy 100% of the shares in Danya Cebus and its subsidiaries for NIS 100 million in cash on the date of the deal and NIS 425 million in 10-year bonds to be issued to me, with a junior lien on the shares of Africa Residences. The bid is in my private company."
Ben-Moshe's bid complements the bid submitted last week by US investor J. Livingston Kosberg with his partner, Israeli Gad Zeevi, to acquire 54% of the shares in Danya Cebus for NIS 324 million at a company value of NIS 600 million. The deal includes Danya Cebus as is, meaning as the owner of 74% of subsidiary Africa-Israel Residences.
Kosberg and Zeevi's bid also includes mutual options for transferring the remaining shares to the buyers. While the call option will be at Danya Cebus's value in the original deal, exercising of the put option will be at a company value of only NIS 330 million. Idan believes that the likelihood of the put option being exercised is greater, and that the proceeds for the bondholders from this bid are therefore only NIS 476 million.
Israel Discount Bank (TASE: DSCT), which is suing Gad Zeevi alleging that Zeevi owes it $22 million that was not paid on time, is also the main creditor of Danya Cebus. The bank is therefore unlikely to agree to the transfer of Danya Cebus to Zeevi before the latter's debt to the bank is fully paid.
The two bids combined total NIS 1.724 billion in immediate proceeds for the bondholders, plus the possibility of receiving NIS 232 million more in the future - a total of almost NIS 2 billion in cash, in addition to NIS 260 million in cash held by Africa Israel following the sale of its hotel activity.
Africa-Israel also owns land in Israel, the value of which Idan put at NIS 30 million, and a lien on land in Russia worth NIS 25 million. Adding up all these figures shows that selection of these bids is likely to bring the bondholders NIS 2.2 billion in cash within a relatively short time, with the possibility of increasing the proceeds to almost NIS 2.3 billion.
Saidoff not giving up
On the other hand, the agreement reached by the bondholders' representatives with the Naty Saidoff group still stands. Saidoff is offering to acquire full ownership of the entire Africa-Israel group for NIS 500 million in cash for the bondholders, bonds totaling NIS 1.57 billion (half with a lien on shares in the subsidiaries, and half with no collateral whatsoever), 2% of the shares in Africa-Israel Properties (worth NIS 50 million), a NIS 40 million upside mechanism in the effect of a stock exchange offering by Danya Cebus, and the lien on the land in Russia, which has a NIS 25 million estimated value.
Idan estimated the nominal value of this bid at NIS 2.18 billion, but this excludes the possibility that Africa-Israel's bonds will be traded on the stock exchange at a lower price than their par value, which is particularly relevant for the bonds without collateral.
The Saidoff group, however, does not intend to give up. Its lawyer yesterday morning sent a long biting letter to the trustees for Africa-Israel's three bond series and their lawyers. The letter complains about the addition of Ben-Moshe's bid to the proxy statement, and asserts that it includes harsh and restrictive conditions to which the bondholders should not consent.
Leviev is strongly opposed
At the same time, Alon Holdings Blue Square reported that it had been sent a letter by Leviev to Ben-Moshe expressing strong opposition to his unilateral action concerning Africa-Israel. According to the letter, Ben-Moshe and Leviev previously signed a document in principle for cooperation in acquiring 100% of the shares in Africa-Israel, and this document makes Ben-Moshe's submission of a bid without consulting Leviev a material breach of the cooperation agreement.
Leviev is also chairman of the Africa-Israel board of directors and exercises tight control over its decisions. It can be assumed that Africa-Israel itself will oppose the sale of part of its assets other than in the framework of an overall settlement, or alternatively through an auction managed by a liquidator on behalf of the court. The letter states that Leviev will not hesitate to utilize all the legal means at his disposal to protect his rights under this cooperation agreement.
The other shares in the operative of Highway 6 are held by Shikun & Binui Holdings Ltd. (TASE: SKBN) and Alon Israel Oil Company Ltd., which have first refusal rights to the shares. Shikun & Binui yesterday notified the Tel Aviv Stock Exchange (TASE) that it was giving positive consideration to exercising this right, and emphasized that this right did not require it to pay the price in Ben-Moshe's bid; the price will be determined according to a valuation of the Highway 6 operator.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 13, 2017
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