Tshuva again fails to delist Delek Energy

Yitzhak Tshuva  photo: Gil Yohanan

Delek Group improved its offer, but it still fell short. Market source: The reasons for the rejection are not purely economic.

Another offer to purchase by Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, for the public's shares in its Delek Energy Systems Ltd. (TASE:DEOL) subsidiary, aimed at delisting it from the TASE, has failed, even though Delek Group improved the cash element the offer. Delek Group, which owns 88.2% of Delek Energy, had to obtain acceptance of its offer from owners of at least 7% of the shares in Delek Energy for the offer to succeed, but owners of only 5.3% of the shares accepted.

A senior capital market source told "Globes," "There is no price at which the offer would have succeeded, among other things because some of the shareholders are making decisions for reasons that are not necessarily economic. There are investors who are in love with this security, and are not selling it for all sorts of reasons, whether because they think that Delek Group is not revealing all of the information it has about Delek Energy, or for other reasons. In my opinion, this security will not be delisted from the TASE, simply because there are enough shareholders whose considerations are not purely economic."

According to figures compiled by Stockr.co.il, investment institutions hold 5.8% of the shares in Delek Energy, i.e. 49% of all the shares held by the public. The investment institution with the largest holding is the advanced training funds of the kindergarten and school teachers - 2.1%. Other major investment institutions with major holdings in Delek Energy are Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) (1.04%), Psagot Investment House Ltd. (0.85%), and Yelin Lapidot (0.75%).

Very low premium even after the improvement

Following the publication of the current offer to purchase in mid-March this year, Delek Energy's share price jumped nearly 15%, while the share prices of Delek Group and Delek Drilling LP (TASE: DEDR.L), which were an important element of the offer to purchase's proceeds, fell, forcing Delek Group to increase the cash element in the offer.

Following the improvement in the offer, Delek Group is now offering NIS 703.64 in cash for each Delek Energy share, compared with NIS 636.40 in the previous offer. The other components of the offer are unchanged: 0.85 shares in Delek Group and 45 participation units in Delek Drilling. At the same time, following the improvement, the premium on the market price for Delek Energy's share was very low - less than 1%, which detracted from the chances that the offer to purchase would be accepted.

Following the failure of the offer, Delek Energy's share price fell 2% Delek Group's share price rose slightly and Delek Drilling's share price was up 1.3%.

Delek Group has tried to delist Delek Energy from trading a number of times (the most recent was in 2013). The group hoped that success of its offer would advance its strategy of simplifying its holding structure as part of the group's preparation for a possible overseas offering of its energy activity.

At the same time, Delek Group is planning to transfer the cash flow from super royalties from the Tamar natural gas reservoir to a special purpose vehicle established for the purpose, and to offer the vehicle's shares on the stock exchange. Delek Energy, which holds 54% of the units in Delek Drilling, has received some of this cash flow up until now.

The super royalty amounted to 1.5% of revenue until the development costs were covered, as of the end of 2017, and then jumped to 6.5% of revenue. Delek Energy believes that if it conducts an offering for the special purpose vehicle, its minimum value will be $200 million.

Published by Globes [online], Israel business news - www.globes-online.com - on April 16, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Yitzhak Tshuva  photo: Gil Yohanan
Yitzhak Tshuva photo: Gil Yohanan
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