The deal between Ilan Ben-Dov and Hutchison Telecommunications International Ltd. (NYSE: HTX; HKSE: 2332) was signed last night, after long negotiations at Hutchison's offices in Hong Kong. Ben-Dov will transfer the controlling interest in Scailex Corporation (TASE: SCIX; Pink Sheets:SCIXF), which controls Orange franchisee Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) to Hutchison, Partner's previous owner. Ben Dov will keep Scailex's parent company, Suny Electronics Ltd. (TASE: SUNY), which will keep a small financial holding in Scailex.
Hutchison will apparently pay $125 million for 75% of Scailex, while Scailex will propose a 12% haircut to its bondholders.
Scailex was due to repay a $300 million seller's loan to Hutchison in 2014. Hutchison lent it the money in 2009 to help it to acquire control of Partner. The repayment will apparently be postponed to 2018.
Suny will use part of the proceeds from the sale to buy the Samsung mobile telephone import and distribution business from Scailex, and this activity will become Suny's core business. Suny will use the balance of the proceeds to repay its debt to its bondholders, in part through a bond buyback.
Before the deal was signed, the value of Ben-Dov's stake in Suny was just NIS 72 million, compared with a value of NIS 700 million two years ago. The deal is least bad alternative for Ben-Dov. He is returning to his "natural size" and with his original business. However, in contrast to the past, when he was considered one of Israel's most liquid businessmen, he will now have to focus on repaying debts in the coming years.
Scailex will be transferred to an experienced controlling shareholder with deep pockets and substantial cash flow, which should substantially improve Scailex's ability to repay its bond debt. The sale of the controlling interest in Scailex to Hutchison immeasurably improves the situation of Suny's bondholders. They will receive a reputable income-producing asset, which will guarantee payment of most of the debt, and maybe even all of it.
Partner's share price rose 11.1% on Nasdaq yesterday, ahead of the deal, to $4.99%, giving a market cap of $776 million, and opens at NIS 18.85 on the TASE today, after rising 6% yesterday.
Published by Globes [online], Israel business news - www.globes-online.com - on June 5, 2012
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