IDB Development Corporation Ltd. (TASE:IDBD) controlling shareholders Moti Ben-Moshe and Eduardo Elsztain continue to face growing anxiety about the company's future. Subsidiary Discount Investment Corporation (TASE: DISI) announced yesterday that it would distribute a NIS 200 million dividend to its shareholders - NIS 2.30 per share.
Before the dividend was announced, the share price of IDB Development, which will receive NIS 150 million of the dividend, jumped 13%. The record date for the dividend is November 6, and the payment date is November 18.
The Discount Investment board of directors decided on the dividend after company shareholders holding 5.1% of its capital sent a letter to the board in the past few days complaining about the company's failure to distribute a dividend.
Represented by Advocates Guy Gissin and Tomer Altman, the shareholders wrote, "The members of the board of directors have failed to do their job and in their duty of care and trust." They wrote that the controlling shareholders had acted according to ulterior motives that were "unworthy and irrelevant" in deciding to refrain from distributing a dividend.
The decision to distribute a dividend comes a few days after the IDB Development board of directors decided to raise capital through a NIS 180-250 million rights issue - a measure originally planned for the end of this year. According to the undertaking by the controlling shareholders under the debt arrangement, Ben-Moshe and Elsztain are expected to jointly invest NIS 140 million in the issue.
The decision to bring forward the financing round was taken in view of the continued negative sentiment towards the IDB Development share and its bond series recently, and the accelerating slide in the share price, reflected in a drop of over 10% within a week. Yesterday's rise offset a large part of the IDB Development share's decline over the past month.
IDB Development is also finding the going hard in its rights issue. Eyal Gabay and Hagai Ullman, the trustees for the group's debt arrangement, who hold 6% of IDB Development's shares in trust, recently demanded that the company consider alternative ways of raising financial resources. Despite Discount Investment's distribution of a dividend, IDB Development asserted today that the preparations for the rights issue were continuing.
In a letter sent to IDB Development, the trustees wrote, "A rights issue at this time, without establishing mechanisms to protect the rights of the minority shareholders in the company, including those entitled to the debt arrangement, will harm the rights of those entitled to the debt arrangement who are minority shareholders in the company, while diluting their holdings in the company and diluting their entitlement to take part in the offers to purchase under the debt arrangement provisions."
The debt arrangement trustees also wrote, "The decision by the company board of directors to make a rights issue when the company share price is at a historic low in the market gives the controlling shareholders a tool for an offer to purchase in the disguise of a rights issue."
Published by Globes [online], Israel business news - www.globes-online.com - on October 30, 2014
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