A Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) director associated with controlling shareholder Shaul Elovitch contacted the Merrill Lynch investment bank in Israel when Bezeq was negotiating the acquisition of Eurocom Group's stake in DBS Satellite Services (1998) Ltd. (YES), and asked the bank to show "flexibility" on the value it had set for Yes. Merrill Lynch rejected the request out of hand. Merrill Lynch is the investment bank that represented Bezeq in the insider transaction currently under investigation by the Israel Securities Authority.
Merrill Lynch remained unwilling to retract its valuation for Yes throughout the negotiations, insisting that the price that should be paid for Elovitch's stake in Yes should not exceed NIS 300 million. On the other hand, the opinion of the investment bank hired by Yes, JP Morgan, which is in effect Elovitch's home bank, gave a valuation for Yes that at certain points reached NIS 4 billion or more. The negotiations between the parties broke down numerous times, and, as has already been described in detail, the deal made no progress. Elovitch was under time pressure because of the constraints dictated to him by the Antitrust Authority for the sale of his holdings in Yes.
Because Bezeq was the only potential buyer, Elovitch was in an inferior bargaining position, which gave Bezeq an opportunity to lower the price of the deal to a minimum, or, as described by those who opposed the deal, "Yes was worthless." It eventually emerged that the total proceeds for Eurocom amounted to NIS 1 billion. Most of the Bezeq directors allegedly acted against the company's interest by supporting Elovitch's interests, as is shown by the minutes of the discussion of the deal, which have come to light. It is therefore no surprise that some of the directors took Bezeq's controlling shareholder's side and personally tried to persuade Merrill Lynch to show flexibility, which it refused to do. In the minutes, reported for the first time yesterday in "Globes," Merrill Lynch representatives appear and explain why the price could not be higher.
Through Bezeq, the director denied contacting making the appeal to Merrill Lynch, while the investment bank refused to comment, referring us to Bezeq.
Published by Globes [online], Israel Business News - www.globes-online.com - on June 22, 2017
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