Digging in Tel-Aviv, Profiting in Jerusalem: Light rail operator acquired for NIS 100 Million

August 20, 2015 | The Marker

Ashtrom, Israel Infrastructure Fund (IIF) and Harel closed, one week ago, on the acquisition of Connex Jerusalem, the operating company of the capital city’s light rail – the three entities are also partners in CityPass, concessionaire of the Jerusalem Light Rail, whose value has soared, according to estimates, to NIS 750 million.

Ashtrom, IIF and Harel are expanding in Jerusalem. About one week ago, the Partnership – the Ashtrom Group, Israel Infrastructure Fund (IIF) and the Harel insurance and finance group – closed on the acquisition of Connex Jerusalem, the operating company of the Jerusalem Light Rail.  The acquisition required approval of the State and the financing banks, and negotiations were conducted for about a year.

In consideration for the Connex shares, the Partnership paid approx. NIS 100 million to the Company’s controlling shareholder, the French transportation giant Transdev.  Ashtrom’s share in the transaction is 50%, IIF’s is 30% and Harel’s reaches 20%.  The three partners hold the same stakes in Citypass, concessionaire of the Jerusalem Light Rail (for 30 years).

The Ashtrom Group participated in the transaction through the subsidiary Ashtrom Properties; the Group is managed by Gil Gueron and Rami Nussbaum, who also serves as Chairman of the Board of Directors.  The Ashtrom Group is controlled by the Nussbaum, Gueron, Meshorer, Rubin and Lifshitz families.  The Allied Investment Group headed by Prof. Itzhak Swary is also a partner in the Group.

Harel Insurance Group and Attorney Yehuda Raveh also have a stake in IIF, which is managed by Yaron Kestenbaum (managing partner).  IIF is considered one of the two largest infrastructure and energy investment funds in the market, alongside the Noy Fund.  As part of the deal, IIF also acquired from Transdev its share in CityPass (5%) – but according to assessments, the transaction was executed at a value less than the economic value of CityPass.  Harel, controlled by Yair Hamburger and managed by Shimon Elkabetz and Michel Siboni, is considered one of the market’s largest institutional players in the infrastructure and real estate sectors.

The economic value of the Jerusalem Light Rail’s operations (net of liabilities) is estimated in the capital market and in the infrastructure sector at NIS 700-800 million.  This value includes a significant “paper” gain to the three partners of the concessionaire.

50 million people annually

Connex, which had been controlled by the French company Veolia before it was acquired by Transdev, operates the first and only light rail system in Israel; the company is responsible for maintenance of the carriages and the tracks, the payment system, customer service, and transportation safety.  CityPass is responsible for management of the project and the French company Alstom, a former partner in CityPass, is in charge of maintenance of the cars.  The length of the Light Rail system is 14 km and includes 23 stations.  The number of passengers on the Jerusalem Light Rail is estimated at more than 140 thousand daily and 50 million people annually.

The partnership in CityPass will soon have to decide on who will serve as Chairman and directors in Connex.  The current Chairman of CiyPass is Avraham (Baiga) Shochat, a former Finance Minister.  CityPass hopes to be able to benefit from the greater synergy created between the concessionaire and the operating company and to participate in tenders for railway projects.

 


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