Teddy Sagi, the controlling shareholder in Playtech Cyprus Ltd. (LSE:PTEC), has acquired 12% of Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) parent company B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM) from Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD), through which Shaul Elovitch controls Bezeq, for NIS 125 million.
"It was clear to us that we had to increase our liquidity," Internet Gold and B Communications CEO Doron Turgeman said. "This was a very good deal for us, at a premium on the market price. We slashed Internet Gold's financial debt by NIS 125 million, and the company now has NIS 292 million in cash. We estimate that we have enough cash for more than two years."
Sagi bought the B Communications shares through Norisha Holdings Ltd., which is registered in the British Virgin Islands. The holding is classified as a financial holding, and Sagi has no plans to influence B Communications' control. Sagi paid NIS 35 per share, a double-digit premium over B Communications opening price on the TASE of NIS 29.74 on Thursday, when the sale was announced.
Elovitch's private company Eurocom Group owns 79% of Internet Gold. In theory, the company can service its debt over the coming year, and sources close to the sale of B Communications shares to Sagi at this time was due to financial considerations on the part of Internet Gold's bondholders, to whom it owes over NIS 1 billion.
It appears that in the wake of debt settlements by tycoons, Internet Gold's bondholders began worrying about the company's ability to meet its upcoming bond payments. The sources noted that Elovitch has the wherewithal to inject capital into the company to calm investors, but because this would be a parties at interest deal, requiring regulatory approval, he decided on a quick sale to an outside investor.
B Communications' main asset is Bezeq, which has a market cap of NIS 13.2 billion, compared with B Communications market cap of $265 million, and Internet Gold's market cap of $68 million. Changes in Israel's telecommunications market, especially the entry of new mobile carriers, halved Bezeq's market between the beginning of 2011 and mid-2012, but it has since rebounded over 50%. Sagi may share the opinion that the worst is behind the company and that prices in the market have stabilized, prompting his investment.
Internet Gold has received no dividends from B Communications, because only in the first quarter did the company switch to a positive cash surplus, which may permit the distribution of future dividends. Bezeq is the company able to distribute generous dividends, unlike its mobile rivals Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), which have temporarily halted the distribution of dividends. Since Elovitch acquired control of Bezeq in 2010, it has distributed NIS 11.3 billion in dividends.
Published by Globes [online], Israel business news - www.globes-online.com - on June 30, 2013
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