Court rules against Nochi Dankner: Buyers can have IDB conglomerate

Nochi Dankner is a step nearer to losing control of IDB, one of Israel's biggest conglomerates, after the courts ruled Sunday that the putative buyers' finances are sound.

IDB can be transferred to buyers Eduardo Elsztain and Moti Ben-Moshe after Tel Aviv District Court Judge Eitan Orenstein ruled Sunday that Ben-Moshe's finances were in order.

The decision all but ends a lengthy legal, financial and public relations battle by Nochi Dankner, with his partner, the Ukrainian businessman Alexander Granovsky, to retain control of the sprawling holding company.

Orenstein gave the Dankner-Granovsky group 15 days to file an appeal.

Elsztain and Ben-Moshe cleared the last hurdle they faced to gaining control of IDB Holding Corporation, the company that sits at the apex of the group, on Sunday after Orenstein concluded that an examination he had ordered of Ben-Moshe's finances found no cause to suspect there was anything inappropriate.

The Judge said the report, which was prepared by the Securities Authority and others, showed that "the source of Ben-Moshe's money is from the current accounts of [his Extra] group and not from any outside source …. There is no evidence that undermines the foundation of the arrangement."

Bailing out IDB

IDB's holdings include many of Israel's leading businesses, such as Super-Sol, it biggest supermarket chain, Cellcom Israel, its biggest cellphone operators; and Clal Insurance, one of Israel's biggest insurers. But the companies at the top of the pyramid-structured group are enmeshed in heavy debt.

The Elsztain-Ben-Moshe proposal offers to bail out IDB with a cash injection of 650 million shekels into IDB Development Corporation, one of the group's top holding companies. IDB's creditors would get 300 million shekel in cash along with 46.7% of IDB Development stock.

Ben-Moshe has said the funds for his share of the bailout will come from units of his German-based Extra Group, primarily from its energy and telecoms companies.

Elsztain is chairman and chief executive of IRSA, Argentina's biggest real estate company. He also chairs Cresud, a major agriculture producer.

Creditors vote for the buyers

Nearly a month ago, Elsztain and Ben-Moshe won support from more than 75% of the votes of bondholders and bank creditors to take over the group, a vote Orenstein needed to approve. Orenstein then ordered the probe into the source of Ben-Moshe's funds.

Elzstain and Ben-Moshe to make the first payment on the bailout plan by January 14 and instructed Eyal Gabbai and Hagi Ullman, the court-appointed administrators of IDB, to oversee the process. All of IDB's directors were instructed to step down and in their place nine new ones as well as new CEO will be named.

The team investigating Ben-Moshe's finances, which was appointed December 17 after lawyers for the Dankner-Granovsky group raised doubts about them, spent two weeks on the assignment and reported back last Wednesday. An Israeli national, Ben-Moshe made his fortune in Germany and was unknown in Israel business circles until he emerged as Elsztain's partner in the IDB bid.

After Orenstein announced his decision on Sunday, all the parties involved – the two rival groups and the attorneys representing creditors -- over a further delay in transferring control of IDB to the Elsztain-Ben-Moshe group.

Opposing any delay, Raanan Klir, representing Elsztain-Ben-Moshe said, "We are creating a situation in which IDB is being managed by its current controlling shareholders who have no interest in ensuring that any other debt arrangement apart from their own will succeed."

Orenstein took a short break to weigh the issue and adjourned his court at about 2:00 P.M. where he gave the Dankner-Granovsky group time to appeal to the Supreme Court. Recognizing that further delays could do more damage to the financially ailing conglomerate and cost creditors hundreds of millions of shekels, Orenstein said the Elsztain-Ben-Moshe group could opt to withdraw their bid with 30 days.