יאהו, מיקרוסופט ו-AOL יאחדו כוחות נגד שליטת גוגל בשוק הפרסום המקוון
ILDC's sale of Hed Arzi and other assets attests to its skill at bettering investments
"The big hole". That's what the real estate industry has mockingly dubbed the Kachtan brothers' construction project at the intersection of Dizengoff-Frishman streets, Tel Aviv. It's a hole in more than name: the project has amassed debts so mountainous that the brothers can't progress any more. The project is stuck.
To borrow the simile, Israel Land Development Corporation's (TASE: ILDC ) big hole is Hed Arzi (TASE: HEDA).
Hed Arzi generated for ILDC subsidiary Ma'ariv (TASE: MARV ) losses exceeding NIS 150 million over five years, and debts in the double-digit millions to the banks. ILDC's controlling shareholders, the Nimrodi family, were forced to infuse perhaps as much as NIS 50 million to keep the music company in compliance with its covenants with the banks. But even those colossal crutches couldn't keep the company on its feet, after it fell back in 1998.
It's over. Today Ma'ariv stopped the music and sent its dance partner packing. It sold its holdings in the group for NIS 100 million, out of which Ma'ariv will be getting NIS 30 million in cash. The rest is in the form of Hed Arzi liabilities that the buyers are undertaking, which total some NIS 70 million.
The buyers are undertaking NIS 38 million in guarantees that Ma'ariv and ILDC gave the banks on behalf of their errant daughter company, and are returning an NIS 15 million shareholders loan from ILDC. The buyers will also be returning money ILDC and Ma'ariv gave to Hed Arzi from the start of 2003.
Not right away, though. The buyers will be repaying the shareholders loans in installments starting in 2007, with the pace depending on Hed Arzi's profits. Nor is that all. In 2009, two years after the installments start, the buyers will have the right to convert the entire remaining shareholders loan from ILDC to Hed Arzi shares.
The buying consortium is headed by Isaac Kaul, and includes Avi Kaminsky and Assaf Bakar. They warble optimistic tunes about Hed Arzi's future, despite its NIS 43 million equity hole.
Singing a new tune
"We mean to turn a profit within 2003," declares Kaminsky, who handled the negotiations with Ofer Nimrodi.
"It's amazing when you learn that the Tower Records chain, which is held by Hed Arzi, is profitable. The great part of the Tower Records stores are profitable, and since Tower has a turnover of NIS 80 million, half that of Hed Arzi, we have grounds for optimism," Kaminsky explains.
"What reduced Hed Arzi to its current condition is mainly the way it's managed," says a source near the transaction, clarifying: "Its headquarters was bloated beyond all proportion." Given the cutbacks already carried out at the music marketing firm, the new owners have every reason to feel optimistic, he added.
One person surely downbeat about Hed Arzi's prospects is Ofer Nimrodi, whose years of trying to coax some joy from the company utterly failed, and who finally got sick to death of the massive losses the company was costing Ma'ariv.
A holding company is measured by how well it improves the assets it holds, and how much profit it makes from selling the bettered assets. Or, how much profit they generate for it.
By those criteria, ILDC was not a good holding company in the last year. The sale of Hed Arzi follows the divestiture of another loss-making asset, the Natali private healthcare company, in June 2002. ILDC got rid of Natali, after ten years of treading water and losing money, for the symbolic price of one shekel plus its liabilities.
Rumors are circulating the market that the Nimrodis also want to shed their holding in ILD Insurance (TASE: ILDI ). They already sold 5% of the company's premiums value, but given how ILD Insurance has performed as a holding, it won't be any surprise if the Nimrodis want out.
The facts cannot be ignored. The sale today of Hed Arzi, that of Natali, and selling ILD Insurance's insurance portfolio say something. They bear witness to ILDC's skill at bettering its assets.