Eight groups enter race for Bezeq stake

29 Oct 2004

According to the Israeli government, eight investment groups yesterday formally entered the competition to acquire a 30% stake in the country’s fixed line incumbent Bezeq. The interested parties are private equity firm Apax Partners, private investment firm Saban Capital Group, a consortium of Russian media company Vladimir Gusinsky and Israeli newspaper holding company Maariv Holdings, Packard Bell founder Benny Alagem, a consortium of the investment arm of Rothschild Bank and Israel’s Polar Investments, the Markstone investment fund, Israeli businessman David Azrieli and investment compny IDB Holding Corp. All candidates had to submit information forms and an ILS10 million (USD2.23 million) guarantee to qualify for the bidding process. The winner will take a 30% stake in the operator, as well as having the option to acquire an additional 10.66%. Assuming this option is exercised, the state will be left with a holding of 1.01%.

The Israeli government first announced its intention to sell the bulk of its remaining shares in Bezeq in August 1998, aiming to offload at least 49% to a strategic investor during 2000, with the remainder to be floated on the Stock Exchange. The process was subjected to delays but it was eventually decided that a tender would be launched for a 50.01% stake in April 2001. Further postponements followed, but the sale was relaunched in November 2001, against the advice of Merrill Lynch, the state’s nominated sale advisors, which claimed that it would not generate sufficient interest, setting 13 February 2002 as the deadline for the formal expression of interest. Despite having planned to have completed the sale by the end of summer 2002, the process experienced yet more delays. By autumn that year five potential bidders had expressed an interest but in October two of these – a domestic holding company known as the Israel Corporation and Apax Partners – withdrew. The three companies left in the bidding were Eurocom, Polar Investments and a group headed by former Bezeq chief executive Isaac Kaul and former communications ministry official Danny Rosenne. Talks stalled, however, and once again the process was mothballed. The current sale process was launched in May this year.

Bezeq continues to hold a de facto monopoly in Israel’s fixed line market, although it does have three main rivals – Barak, Golden Lines, which focus on the international voice telephony market, and HOT, a joint venture of domestic cable TV operators Matav Digital, Tevel and Golden Channels, which was licensed to provide local services in November 2003. At the end of March 2004 there were 2.91 fixed lines in service in Israel, a penetration rate of 44.8%.

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