Earlier this week, the Tel Aviv District Court decided to reject the request for a tender for Hutchison’s shares in Partner. This paved the way for a deal that would make the Rodav-Gabay Group the controlling owner of the company.
The deal shocked the communications market for several reasons, mainly due to the surprising move of Avi Gabay who left the management of Cellcom and in one moment became the owner of a competing company.
The deal does not change the market structurally, but personally it will have a lot of effects on a number of executives in the entire cellular market, and the capital market will probably like the fact that a company like Partner regains control and stability.
1. What did the court decide and what does the decision mean?
The court approved the sale of Hutchison shares to the Rodav-Gabay Group, following an attempt by the Saban Group to delay the transaction. The Saban Group held the shares until the end of 2019 and returned them to Hutchison, which gave it a $ 300 million loan, which was supposed to To be repaid by that date after refusing to pay the debt including interest.
2. What is the value of the transaction, and how will it be executed?
The value of the transaction is $ 300 million for 27.1% of the controlling shares in Partner, which at the time of the transaction were worth close to NIS 950 million. But since then, Partner’s share has risen, and today the shares are worth about NIS 1.1 billion. The financial entities investing in the Phoenix-led deal are Menora, Clal, Moshe (Mori) Arkin and Migdal. They provided a full bank guarantee for the full amount, which was a crucial consideration for the receiver to close the deal with.
3. What are the expected roles of Avi Gabay and Shlomo Rodev?
Things are not completely closed, but it is estimated that Gabay will serve as chairman of the board, and will hold about 3% of Partner’s shares in exchange for NIS 90 million that he will invest from his money and through loans he will take. Shlomo Rodev may sit on the board and may not, -Director together with Gabay.
4. What is expected to happen to the current management?
The question is what will Avi Zvi, the company’s CEO who took office about six months ago, do? They will want him to stay, but in any case what is certain is that the entry of a new CEO will shake up the partner she managed with a new rifle. Of course it depends on the identity of the CEO who will enter but no doubt this will be a big upheaval.
5. Can Gabay hold a managerial position in Partner?
Avi Gabay is obligated under his contract with Cellcom to cool down for a year. The expectation is that at some point he will ask the Cellcom board of directors to limit the period to several months. The question of what Cellcom’s board will do remains unanswered at the moment, as Gabay has not yet submitted a request to shorten the cooling. It is estimated that the board, despite criticism of Gabay’s departure, will try to reach an understanding with him in an orderly fashion, with the aim of ending the event quietly and responding to the request.
6. What strategy are they likely to lead in Partner?
If to be a cynical moment, then the strategy will be how to recoup the investment as quickly as possible. In other words, these are financial entities that were looking for an investment channel and ignited the management buyout model, created by Gil Sharon, former CEO of Pelephone, when he acquired Golan Telecom together with Electra Consumer, and sold it at a handsome profit. Partner dressed exactly for this model, thanks to the combination Of capital-rich financial entities, with two leading figures in the communications market that will run the business.As they enter the company, the emphasis will be on how to improve performance and how to focus on what peaks and get rid of what is not.
7. What will happen to the core business (TV and fiber)?
It is likely that Partner will continue with the marketing of the product and at the same time try to upgrade it. On the issue of fiber, the company has stated that it is promoting a deployment to one million households next year – it is likely that there will be no changes in that either.
8. Are and how are the other companies expected to react?
Other companies are not expected to oppose the deal, not even in terms of regulation. The entry of controlling shareholders into the partner may send a positive message. The cellular market is bruised, and despite the buds of profitability in the last quarter, the companies are not making enough money in relation to the scope of their activities. The question is whether this can be changed more complex than one thinks, and is related not only to the question of the average revenue per subscriber that everyone estimates will go up.