Shikun U Binui sells stake of Route 6 to Israel Infrastructure Fund
13, September 2011
Asset: Highway 6

Shikun u’Binui will report a capital gain of NIS 85 million on the sale

Shikun u’Binui Holdings Ltd. (TASE: SKBN), controlled by Shari Arison, has sold 24.5% of Road 6 (the Cross-Israel Highway) franchisee Derech Eretz Highways Ltd. to Israel Infrastructure Fund (IIF) for NIS 773 million. Shikun u’Binui will report a capital gain of NIS 85 million on the sale.

Shikun u’Binui and IIF currently own Derech Eretz in equal shares. The sale reduces Shikun u’Binui in the company to 25.5%. Shikun u’Binui did not sell its 24.5% stake in Derech Eretz Highways Management Ltd., which operates the Road 6 toll road, and is waiting for permission to increase its stake to 35%.

The deal reflects a company value of NIS 3 billion for Derech Eretz. The sale is part of IIF’s effort to block rival Noy Infrastructures and Energy Fund’s acquisition of 49% of the government’s rights in Derech Eretz for NIS 1.39 billion. Shikun u’Binui said that the price tag was based on Derech Eretz’s value in the Noy Fund deal.

Sources inform ”Globes” that Noy Fund tried to buy Shikun u’Binui’s stake in the company, but failed to strike a deal.

IIF promised that it would try to have Shikun u’Binui or its affiliates carry out future road works on Road 6 at market prices in accordance to an agreed-upon mechanism.

IIF’s shareholders Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Bank Leumi (TASE: LUMI) Leumi Partners Ltd., and investment house Altshuler Shaham Ltd. Noy Fund is owned by Bank Hapoalim (TASE: POLI) Poalim Capital Markets – Investment Bank Ltd. and IDB Holding Corp. Ltd. (TASE:IDBH) unit Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS)

Shikun u’Binui CEO Ofer Kotler said, “We successfully completed the planning, financing, and construction of Road 6 – giving substantial added value to Shikun u’Binui. Road 6 has become an income-producing property, and in line with the company’s strategy, we decided to sell our rights in it for NIS 773 million, reflecting a return of 8%.

Shikun u’Binui’s share price rose 6.7% by mid-afternoon to NIS 6.42, giving a market cap of NIS 2.6 billion. Harel’s share price rose 2% to NIS 138.50, giving a market cap of NIS 2.9 billion.