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TEL AVIV (Reuters) – Eli Rozenberg’s bid for a controlling stake in El Al Israel Airlines (TA:ELAL) is below the price that can be obtained in a public share offering and may struggle to gain board support, said a source close to the board who declined to be named.
Last month Rozenberg, a U.S. citizen now resident in Israel, offered to funnel $75 million into the airline in return for a 45% stake. Rozenberg is the son of Kenny Rozenberg, chief executive of New York-based nursing home chain Centers Health Care.
“From my talks with members of the board, most are against the proposal,” the source said. “Shareholders are opposed to it.”
The source, who asked not to be identified, said Rozenberg’s offer was worth only 0.63 shekel ($0.1851) a share, below the 0.71 shekel market price.
“It’s better to offer shares to the public at 0.70 shekel,” the source told Reuters. “The government would buy shares that aren’t bought at 0.67, so there’s a safety net.”
Israel’s flag carrier, in which Knafaim Holdings (TA:KNFM) is the biggest shareholder with a 38% stake, was hit hard by the coronavirus outbreak and is in advanced negotiations for a government bailout to avoid bankruptcy.
The government offered to back $250 million in bank loans in exchange for El Al issuing $150 million in shares, which the state will buy if no one else does in a public offering.
El Al’s board has yet to vote on Rozenberg’s offer, which would also need shareholders’ approval.
Spokesmen for both El Al and Rozenberg declined to comment.
“I don’t see the board taking a decision in favour of this deal,” said Ilan Arad, vice president of investment at Israeli investment house Yetsira.
Even an improved offer should not be accepted, he said, because transfer of control will not resolve much deeper problems the airline faces, such as not being able to fly on the Jewish Sabbath.
The heavily indebted airline has a market cap of 350 million shekels.
The source said Rozenberg can still buy shares in the public offering. “It’s a question of him buying at an ‘end-of-season sale price’, or buying in the offering when the price won’t be below 0.67 shekel,” he said.
El Al, which has reported losses for two years running and racked up debt to renew its fleet, suspended flights when Israel closed its borders and furloughed most of its employees.
($1 = 3.4030 shekels)
