Haim Saban is considering selling his stake in Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ), three years after acquiring it through Ap-Sab-Ar Holdings Ltd. (the Apax Partners-Saban Capital Group Inc.-Arkin consortium). He has often said that he wants to sell the stake, and sources close to Bezeq have said that he will do so if he is offered the right price.
Saban Capital and Apax each own 45% of Ap-Sab-Ar Holdings, and Moshe Arkin owns 10%. Ap-Sab-Ar's articles of incorporation stipulate that the partners must sell their holdings together, or create a new controlling core for Bezeq. If Saban finds a buyer for his stake, Apax and Arkin will presumably want to sell as well.
Meanwhile, in view of the current market climate and Saban's high asking price, he is unlikely to find a buyer at this time. The state sold the 30% controlling core in Bezeq for NIS 4.2 billion in 2005. Bezeq has subsequently distributed NIS 5.13 billion in dividends of which Ap-Sab-Ar has received NIS 1.54 billion, pretax.
Ap-Sab-Ar's Bezeq stake is currently worth NIS 4.97 billion, and amounts to NIS 6.52 billion including the dividends. After deducting the initial investment, it has made a 54% return on investment. Bezeq's share has risen 50% since its privatization.
Given Bezeq's performance since its privatization, and in view of its large dividends, Ap-Sab-Ar and its owners have made a handsome return on their investment. Since none of them are strategic investors in Bezeq who places special emphasis on investment in telecommunications, market sources and Bezeq executives predict that a sale of the shares is likely soon.
Bezeq's growth potential is limited given the tight regulation under which the company operates, so the company's management and shareholders try to ensure internal streamlining is greater than the decline in revenue caused by competition in order to achieve profits.
Two years ago, Bezeq was shaken by a stock options scandal in which then-CEO Yacov Gelbard and other executives received bonuses and options that the board had not properly approved. Gelbard was forced to resign and Bezeq chairman Dov Weissglass quit.
Arkin considered selling his stake in Bezeq at the time and conducted lengthy negotiations with former Bank Hapoalim chairman Shlomo Nehama for this purpose, and who wanted to be appointed Bezeq chairman in exchange for the stake. No deal was struck when the parties could not agree on a price.
One possible buyer of Saban's Bezeq stake is Eurocom Group, owned by Shaul Alovitz, which is the minority shareholder in YES, Bezeq's satellite broadcasting subsidiary. Eurocom, which controls Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) and its subsidiary 012 Smile.Communications Ltd. (Nasdaq:SMLC; TASE: SMLC), both of which compete against Bezeq subsidiaries, is waging a struggle with Bezeq for control for YES.
If Bezeq ultimately acquires Eurocom's stake in YES, Alovitz may try to acquire a stake in either Bezeq itself or in cellular operator, Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), in response.
A spokesman for Haim Saban declined to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on September 17, 2008
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