A number of foreign funds are interested in acquiring the controlling interest, including Highland Capital and Searchlight Capital
Despite pressure from the bondholders of Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) to sell control of Bezeq IsraeliTelecommunication Co. Ltd. (TASE: BEZQ) to the Neuman family, the board of directors of Internet Gold is going ahead with a regular sale process for sale of control in Bezeq. Sources inform “Globes” that Internet Gold recently appointed Deutsche Bank as the investment banks to lead an order sale of the controlling interest. The plan is to hold a quick and relatively short proceeding, with a deal being signed within three months. The timetable is a crowded one, since the Jewish holidays fall in September, which consequently has few working days
Internet Gold holds 65% of the shares in B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM) (the holder of the shares in Bezeq), whose market cap is NIS 565 million. The goal is to sell the shares at a substantial premium on the current market value, which is regarded as low
The sources added that a number of private equity funds had expressed interest in acquiring control of Bezeq, including Texas-based Highland Capital Partners, represented in Israel by former Deputy Minister of Foreign Affairs Danny Ayalon. The fund manages an estimated $15 billion in assets
Another fund that “Globes” previously reported to be interested in the acquisition is Searchlight Capital Partners, a US fund that has already made investments in the communications sector in various countries. Searchlight Capital is managed by founding partner Eric Zinterhofer, son-in-law of businessperson Ron Lauder, who as far as is known is not connected to the fund or the deal
The banks and Eurocom creditors refused
It is also believed that the Neuman family, which has already negotiated to acquire control of Bezeq, is likely to compete. The Neuman family already reached understandings with Internet Gold last month on the acquisition of 36-52% of the shares in B Communications for up to NIS 730 million. The deal was at a premium of over 30% on the market price of the share at the time
Internet Gold wanted to go ahead with and sign the deal (the company’s bondholders also supported this deal), but the bank creditors in Eurocom (the controlling shareholder in Internet Gold) refused to approve this option, arguing that they had injected NIS 50 million into Internet Gold only a short time ago to stabilize it financially so that an orderly sale process could be conducted without pressure to sell the controlling interest. Following a power struggle between the creditor banks (Israel Discount Bank (TASE: DSCT), Bank Hapoalim (TASE: POLI), and First International Bank of Israel (TASE: FTIN)) and Internet Gold, managed by Doron Turgeman, it was decided to hold a regular procedure with a set time span, during which the banks would not try to sell their shares in Internet Gold itself
The sale process was entrusted to Internet Gold, but the banks are also involved in it. They recently put four of their representatives on Internet Gold’s board of directors (out of eight directors) and following the shareholders’ meeting are expected to add a fifth director, giving them a majority on the board
Assuming that such a deal for the sale of shares in B Communications is reached, the pyramid through which Shaul Elovitch previously controlled Bezeq will be dismantled, with control of Bezeq being exercised through a single company, thereby fulfilling the requirements of the Promotion of Competition and Reduction of Concentration Law (another layer of the pyramid must be eliminated by the end of 2019)
Although Internet Gold’s financial situation has stabilized after raising NIS 100 million several weeks ago, the negative sentiment towards Bezeq’s share and the entire communications sector is having a dramatic effect on the value of Internet Gold’s assets. Bezeq’s share price lost 5% more of its value last month and has dropped 35% over the past six months. In view of the volatility and fragile situation, it appears that the parties agree that the sale procedure should be quick and efficient
Or Elovitch also interested
At the same time, the special managers of Eurocom (the banks’ lawyers) are proceeding with the sale of other assets belonging to Eurocom. A sale process is currently taking place for communications services company Satcom Systems Ltd. (TASE: STCM)
Sources reported today that Or Elovitch, son of Shaul Elovitch, the chairperson of Satcom, and Dan Zjicek, its CEO, were trying to assemble a group of investors to buy the shares. The company’s current market cap is NIS 41 million and the value of Eurcom’s holdings in it is NIS 25 million. In its previous attempts to reach a debt arrangement in Eurocom, the Elovitch family also tried to preserve its control of at least Satcom by buying its shares