In line with its announcement last month, YHK General Managers, the controlling shareholders in Equital Ltd. (TASE:EQTL), have made a NIS 400 million offer to purchase for 4.1 million shares, 25% of the company's capital.
YHK's current 44.5% stake in Equital, which controls income-producing real estate and gas companies, is worth NIS 710 million. YHK, controlled by Haim Tsuff and the Livnat family, wants to increase its holdings in Equital ahead of the upcoming dilution of all Equital shareholders when the company is merged with JOEL Jerusalem Oil Exploration Ltd. (TASE: JOEL), its subsidiary.
The specifications for the offer to purchase published today show that 15-34% of the amount to be paid by YHK is likely to come from JOEL, which has an 8.56% minority cross-holding in Equital. According to the specifications, JOEL is likely to respond positively to the offer to purchase, so the proportion of the purchase from it will depend on the response to the offer by the public.
Completion of the offer to the purchase will give Equital 69.5% of the shares in JOEL. The NIS 97.70 share price for the offer to purchase, which was already published in the initial announcement in December, was followed by a 22% jump in Equital's shares price to its current level of NIS 97.40.
Equital is a three-level pyramid of public companies, and under the Promotion of Competition and Reduction of Concentration Law, the three layers must be reduced to two by the end of next year. Equital is therefore trying to merger its JOEL subsidiary, currently the second layer in the control pyramid, into itself. This will make the third layer, which includes Naphtha Israel Petroleum Corp. (TASE: NFTA) and Airport City Ltd. (TASE:ARPT), the second layer in the pyramid.
One the way to its offer to purchase, YHK last week raised NIS 400 million in a private bond issue to investment institutions. The 2.6-year bonds were rated A minus by S&P Maalot, and bear 2.57% annual interest. The bonds also have strong collateral in the form of a lien on Equital shares, with 45% loan-to-value (LTV) ratio. The bondholders will receive a lien on Equital shares with a value of NIS 900 million.
Tsuff, an associate of businessperson Koby Maimon, holds a 74% controlling interest in YHK, while the Livnat family, the controlling shareholder in infrastructure company Taavura Holdings, owns the other 26%.
Through JOEL, Equital controls real estate company Airport City and the Isramco Negev 2 LP (TASE: ISRA.L) oil and gas exploration partnership, which owns 28.75% of the Tamar natural gas reservoir. The Equital-JOEL merger is slated to take place through a purchase of the public's holdings in JOEL, which have a current market value of NIS 2.25 billion. The boards of directors of both companies have already begun negotiating on the proceeds to be received by the minority shareholders in JOEL, to consist of shares to be issued to them by Equital, cash, or a combination of the two.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 21, 2018
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