Down payment demand complicates Egged sale

Difficulties have arisen in the sale of bus company Egged. The three entities that won the tender to bring an investor into the company, Carasso Motors, Migdal Insurance and Financial Holdings, and Aluma Infrastructure Fund, announced today that they were opposed to the new demand presented to them by Egged that they should pay 15% of their bid, NIS 420 million, by April 25. The consortium bid NIS 2.8 billion for 50% of the shares in Egged. Meanwhile, Egged’s shareholders are due to approve the deal.

The three tender winners astonished the capital market when they offered to buy half the shares in Egged at a company valuation of NIS 5.6 billion, and to buy the other 50% from the shareholders at the same valuation over three years. The consortium won Egged’s tender to bring an investor into the company, in accordance with its agreement with the government, a step due to be completed by the end of May.

In a letter to Egged, the three tender winners confirm that they have received notification of their win, but express their objection to the new demand presented by Egged on Friday. “As we informed you yesterday at the meeting that took place between representatives of Egged and of our consortium, your new proposal raised in your notification represents a change in the terms of the deal and is not acceptable to our consortium.”

If the deal falls through, the underbidding consortium, led by the Keystone Fund, which offered NIS 4.6 billion to buy Egged, will probably win the tender.

In an agreement with the state in 2018, valid until 2029, Egged agreed to bring in an investor who would hold at least 50% of the company. Initial bids were submitted last November, and in March this year the second round took place.

Egged has 1,306 shareholders – the members of the Egged cooperative who became shareholders when it was turned into a corporation in 2019. The winning bid means that each shareholder will receive NIS 2.1 million gross for the first half of the shares, and a similar amount for the second half, if he decides to sell. The winning consortium’s plans for Egged include expanding its transport services, enhancing its real estate portfolio, and even a possible public offering.

Egged’s salaried workers were surprised by the news of the winning bid, and have demanded an urgent meeting with Egged’s management to agree the date on which the bonus which they say they are entitled to under the collective agreement of April 2018 will be paid to them. The bonus, as derived from the amount of the current deal, totals NIS 196 million.

Published by Globes, Israel business news – en.globes.co.il – on April 12, 2022.