(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
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
"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
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)