(Recasts, adds details, comments, market reaction)
By Steven Scheer and Tova Cohen
TEL AVIV Jan 6 Nochi Dankner, once one of Israel's most powerful businessmen, lost his debt-ridden empire on Monday - the IDB conglomerate that controls some of the country's most prized assets.
Control of IDB Holding Corp and its numerous subsidiaries will be transferred to Argentinian businessman Eduardo Elsztain and his Israeli partner Moti Ben-Moshe, who offered a debt settlement to take the company over, a move that was approved by more than 75 percent of bondholders and bank creditors last month.
On Sunday a Tel Aviv judge upheld the creditors' vote and a day later Dankner withdrew a bid to delay implementation in what had been a last-ditch effort to retain control of the group he led for a decade.
Investors rejoiced, with IDB's shares jumping 44 percent since Sunday's court decision while bond prices also rose.
"Yes, there were some successful deals here and there but overall Dankner is responsible for terrible damage not just to his company but to the entire Israeli business environment," Rotem Starkman, deputy editor of the TheMarker financial daily wrote, citing, among others a failed "megalomaniac" project in Las Vegas.
Dankner symbolised a class of businessmen in Israel labelled "tycoons", who have been blamed by the public for stifling competition, resulting in a high-cost of living.
IDB is one of 10 large business groups that control about 30 percent of the market value of Israel's public companies.
Its complex "pyramid" structure consists of tiers of holding companies that enabled IDB to hold sway over a business empire while actually owning only a fraction of the equity in the companies it controls.
IDB owns IDB Development, which owns Discount Investment Corp, which controls Koor Industries. Those units control Cellcom, Israel's biggest mobile phone operator, and leading supermarket chain Super-Sol, Clal Insurance and many other companies.
Dankner, Starkman said, led IDB into an unprecedented crisis that forced him to sell assets and shrink the group.
Public outrage at economic concentration following mass protests in 2011 over high costs of basic goods led the government to pass a law limiting the number of levels in such pyramid structures. In addition, conglomerates will no longer be able to own both major financial and non-financial concerns.
After the Elsztain-Ben-Moshe group won creditors' support to take over IDB, Judge Eitan Orenstein approved the vote but ordered an investigation into the relatively unknown Ben-Moshe's sources of financing.
The Haaretz newspaper at the time called the decision "an earthquake for Israeli business" and said that every businessman would know that he cannot take out huge loans and gamble with them on risky investments without paying a personal price.
On Sunday, the judge upheld his earlier but acceded to the Dankner group's request to delay implementation to allow time to appeal.
"Following a deeper examination of the ruling ... the appellants advise that they are withdrawing their request to delay implementation of the ruling," the group said.
Further rubbing salt into Dankner's wounds, the Justice Ministry said that Tel Aviv's district attorney is to decide whether to indict him on charges of securities fraud related to an IDB share offering in 2012.
IDB expanded rapidly over the past decade under the control of Dankner, whose rival debt settlement proposal was rejected by creditors, but has been hit by slowing economic growth and increased competition.
IDB Holding owes bondholders 2 billion shekels ($571 million) and its subsidiary IDB Development owes a further 5.8 billion.
($1 = 3.51 Israeli shekels) (Editing by David Evans)