April 29, 2018 / 8:47 AM / 5 months ago

UPDATE 1-Israel's Bezeq Telecom controlling shareholder loses board control

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By Steven Scheer

JERUSALEM, April 29 (Reuters) - Shareholders in Bezeq Israel Telecom voted for a new board of directors that removed the controlling shareholder’s majority and paved the way for an overhaul of Israel’s largest telecoms group.

Shareholders voted to increase the board to 13 directors from nine, but just five are considered tied to controlling shareholder B Communications.

Five are external directors, three of whom were previously elected, and another two have no connection to B Communications. One other represents Bezeq’s workers, Bezeq said.

Typically in Israel, the controlling shareholder controls the board.

The new board will convene on Monday and is widely expected to name Shlomo Rodav as chairman. Rodav served as chairman of Bezeq from 2007 to 2010.

Interest in Bezeq’s annual meeting has been building since January when activist investor Elliott said it had taken a 4.8 percent stake to push for changes in the wake of a securities investigation into the company’s management and owners.

Elliott’s calls have received backing from several other minority shareholders, mainly Israeli institutions.

“It was important to convey a clear message that every company officer and director ... who was present at the time of an interested party transaction that harms the public will encounter institutional investors who will do everything in their power to remove him from the company,” said Meitav Dash Investments, which owns 1.3 percent of Bezeq.

Bezeq CEO Stella Handler was arrested in February in connection with a wider investigation into alleged fraud, bribery and securities offences. She has denied any wrongdoing and plans to step down in July.

Controlling shareholder and former chairman Shaul Elovitch, a family friend of Prime Minister Benjamin Netanyahu, was also arrested along with a number of other officials connected with Bezeq. They all deny any wrongdoing.

Elovitch controls Bezeq through B Communications, a unit of his indebted Eurocom group.

Most directors implicated in the investigation have resigned, clearing the way for the board to be overhauled. The terms of two directors implicated will end at the end of the year.

Shares in Bezeq, once a strong state-run monopoly but whose various units now face stiff competition, were up 2 percent in morning trade on Sunday. They are down 10 percent this year and fell by 29 percent in 2017.

Reporting by Steven Scheer; editing by Jason Neely

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