Kardan Israel estimates that it will post a NIS 100 million capital gain on the NIS 397 million deal.
Kardan Israel Ltd. (TASE:KRIS) today completed the sale of its 46.1% stake in the Universal Motors Israel (UMI) auto import and leasing company to its partner, the Iny family-controlled Mizrah company, for NIS 397.35 million. A Kardan Israel shareholders meeting yesterday approved the sale by a decisive majority.
Following the completion of the sale, Kardan Israel received an immediate NIS 214.4 million cash payment, which it will use to repay a NIS 140 million loan from Mizrahi Tefahot Bank (TASE:MZTF). Up until now, Kardan Israel's holding in UMI has been attached to secure this loan. NIS 30 million will be used to pay Kardan Israel's debt to Israel Discount Bank (TASE: DSCT).
The rest of the proceeds on the sale will be paid in four NIS 43.7 million annual payments, with the addition of prime +0.75% interest. The seller can request a NIS 12 million advance on the future payment in June 2017, should this be needed to repay a NIS 67 million loan from a financial institution.
As security for the future payments, Mizrah gave Kardan Israel a lien on 21.2% of UMI's share capital. UMI also undertook to repay UMI's NIS 19.4 million debt to Kardan Israel no later than the beginning of the second quarter of 2017.
Kardan Israel said that it was considering the accounting consequences of the sale. At this point, Kardan Israel estimates that it will post a NIS 100 million capital gain, based on its 2016 second quarter financial statements. Kardan Israel CEO Eytan Rechter said, "We are glad that the deal has been completed. The resources obtained from this sale will enable the company to consider new directions for development."
The sale agreement between Kardan Israel and the Iny family is a new one. The previous agreement signed over a year ago was canceled following allegations of lack of transparency concerning the business connections between the Iny family and Kardan Israel chairman Yosef Greenfeld, one of the controlling shareholders in the company (because the Iny family was to have given Greenfeld NIS 40 million for his private creditors arrangement, a payment that would have been secured by a lien on his holdings in Kardan Yazamut).
Brothers Moshe and Shmuel Listenberg, who are shareholders in Kardan Yazamut, the parent company of Kardan Israel, led the opposition to this agreement. Moshe Listenberg is married to Yosef Greenfeld's daughter, but the two men have been personally estranged for many years. The brothers alleged that there were serious improprieties in the deal and how it was reported to the public, and warned the company directors of the severe damage that this would cause to all of the shareholders.
Following the criticism, and at the demand of the opponents, the Kardan Israel board of directors established an independent board of directors committee, which conducted negotiations with the Iny family on the deal and its terms. Figures published today by Kardan Israel show that 99.82% of the shareholders who voted supported the sale.