After an arduous, seemingly endless battle, Nochi Dankner on Tuesday lost
control of IDB, Israel’s largest conglomerate, though a narrow possibility
remains that he could win it back.
Tel Aviv District Court Judge Eitan
Orenstein approved a bondholder vote that wrested control of the company from
the tycoon in favor of a plan offered by Argentine billionaire Eduardo Elsztain,
a former Dankner ally, and businessman Motti Ben-Moshe, subject to certain
IDB owns Cellcom, Shufersal, Clal Insurance and many others,
and the change in ownership could widely impact the public at large, as many
people’s pensions are invested in the company and its subsidiaries. IDB stock
trading halted on the Tel Aviv Stock Exchange following the decision.
court said that while in principle, Elsztain and Ben- Moshe already controlled
the company and not Dankner, the decision would not formally go into effect
until December 29, and could not be implemented until Ben- Moshe turns over full
documentation of his German business Xtra Holdings to prove he had the
wherewithal to fund the deal.
Should the Israel Securities Authority, the
state trustee and the state observer, deem Ben-Moshe’s financial position
untenable, the decision could yet be overturned by the Tel Aviv District Court.
If Ben- Moshe’s financial position is approved, Dankner could still appeal to
the Supreme Court to overturn Tuesday’s ruling.
Following the judge’s
ruling, Dankner sounded a defiant note: “I believe, that when all is said and
done, the company will remain in our hands. The last word has not yet been
Dankner added: “I’ve said several times that I believe in the
Israeli justice system and its decisions. The judge required the other group to
reveal the source of their money and to uncover who the true controlling
shareholders are – something that has not yet been done.”
rejected Dankner’s comments, stating, “It is his right to live in a
He thanked the judge for his decision and vowed that IDB was
“beginning on a new path.”
The court called the entire course of the case
highly irregular, exhibiting a range of unusually complex legal
It added that there was no basis to order a liquidation of the
company, since an expert had said that the company’s value would be maximized by
staying in business under the new deal.
The court said that Dankner’s
insistence that he had offered a better deal was not sufficient to overcome his
creditors clear will, which manifested itself this month in a 75 percent vote
favoring new leadership under Elsztain and Ben-Moshe’s plan.
troubles began when the company began reporting major losses in 2011, as
investments in Credit Suisse, Cellcom and US real estate – hit respectively by
the financial crisis, cellular reforms and the real estate bubble burst –
failed. By late 2012, it became increasingly clear that IDB would not be able to
pay its creditors for much longer.
Bondholders struggled to recoup their
losses as Dankner tried to attract more investments from the likes of Elsztain
to stabilize the company.
In April, public outrage forced Bank Leumi to
reverse a decision to write off NIS 150 million of debt from IDB’s parent
company, Ganden holdings. By July, Elsztain withdrew his support for Dankner,
and set out to offer an alternative arrangement, sending Dankner into the arms
of Ukrainian businessman Alexander Granovsky.
Psagot, Israel’s largest
investment house and one of the bondholders’ representatives, welcomed the
decision, saying in a statement the IDB case “redefined the rules of the game
between institutional bodies and the controlling shareholder that do not live up
to their obligations to toward the saving public.”
The decision aligned
with the goals of finding a feasible settlement that returned the most value to
debt-holders – including new investments into the economically successful part
of the company – and setting a precedent.
The investment group said
Israel’s regulatory system needed to learn lessons in order to shorten the
process, which took 15 months, for future cases. Labor MK Shelly Yacimovich
echoed the sentiment, calling on regulators to act in order to “ensure that
these kinds of dangerous adventures and insatiable greed won’t repeat
Notwithstanding the court decision, the company was already
headed for significant changes. Earlier in the month, the Knesset passed a bill
to limit market concentration, requiring so-called pyramid companies – companies
whose subsidiaries own subsidiaries – break apart. As a result, IDB, the largest
of Israel’s pyramid companies, has to restructure significantly in the next four
to six years.
Meretz Chairwoman Zehava Gal-On said that while she was
pleased that Dankner, “who exploited IDB’s pyramid structure,” was removed, the
court’s decision was a “missed opportunity.”
“Instead of moving the IDB
pyramid from the hands of one leveraged tycoon to the hands of other leverage
tycoons, it would have been better for the court to order the dissolution of the
pyramid, sending a clear message to Israel’s capital-owning families that the
era of pyramids and milking companies has ended,” she said.
Minister Yair Lapid and Economy Minister Naftali Bennett did not comment on the