Despite the initial opposition of the sale the controlling interest in Scailex Corporation (TASE: SCIX; Pink Sheets:SCIXF) by Ilan Ben-Dov to Hutchison Whampoa Ltd. (HKSE: 0013), the bondholders of Scailex and its parent company Suny Electronics Ltd. (TASE: SUNY) received the news of Hutchison's cancellation of the deal, after due diligence, with pessimism, and sent the prices for the two companies' share and bonds plummeting.
Nonetheless, many investment institutions find it hard to believe that the sale of Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) controlling shareholder Scailex is finished. Most institutions kept their cool, not to say wishful thinking, and believe that a deal will be struck. "It seems that the announcement of the cancellation of the deal is just part of the negotiations," an investment manager at a large investment house told "Globes" today. "Hutchison is probably preparing another deal, because it realizes that there are cheaper ways of taking over Partner."
The investment manager said he had been asked a few days ago if he wanted to sell a large block of Scailex bonds, and that this may have been an attempt by Hutchison to see whether it was possible to take over Partner through its bonds, and at what price. The manager believes that Hutchison cannot really abandon the deal, because Scailex owes it $300 million for the seller's loan Hutchison gave it when it acquired Partner from Hutchison Telecommunications International Ltd. (NYSE: HTX; HKSE: 2332) in 2009. "Unlike some fund that decides not to invest after a long review, Hutchison is in this deal," he said.
A debt analyst at a mid-sized investment house said today, "It cannot be ruled out that Hutchison will try to create a direct deal with Scailex's bondholders, with Suny and Ben-Dov out of the picture."
An investment manager at another big investment house agrees. "On one hand, Hutchison's willingness to take back control of Partner was a surprise at first, so its perception of the deal does not really surprise us," he said. "On the other hand, they've already decided to go for the deal and to buy Partner back, so the claims made in Scailex's announcement about why the sale was cancelled seem ridiculous.
"Back in May, it was clear what would happen to the mobile carriers, and it's unlikely that something new and material suddenly emerged. That's why it seems to me that this is an attempt to improve a position and maybe lower the price." He added, "Shlomo Eliahu is doing the same thing with Generali over Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), and First Israel Mezzanine Investors Fund (FIMI) did this in its acquisition of Ham-Let (Israel-Canada) Ltd. (TASE: HAML) from Discount Investment Corporation (TASE: DISI)."
A top capital market source today criticized the investment institutions' conduct in the negotiations with Hutchison. "The situation can be read in two ways. One, if the cancellation is real and Hutchison is really gone, the institutions should be hit with lawsuits from savers whose pensions they are managing for negligence in the negotiations. Settlements are made quietly and behind the scenes, without running to the media with threats about opposing the deal," he said.
"The other, and more reasonable, possibility is that the cancellation is not final. It seems that Hutchison simply took the reins, and instead of the institutions making ultimatums, Hutchison made it. That's why I think that it hasn’t withdrawn from the deal, but is trying to turn into a different deal."
Published by Globes [online], Israel business news - www.globes-online.com - on August 21, 2012
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