Elron Board Ousts Chairwoman Bachar Menuch, Reinstates Dan Hoz

Dan Hoz has returned to Elron as temporary chairman, a position he previously held when the company was controlled by DCL. His appointment follows a contentious board meeting where a majority voted to remove Lisia Bachar Menuch, who had served as chairwoman since the Arieli Group took control. The move was initiated by two directors, Evan Renob and Erick Bentov, who are also partners with Bachar Menuch in the Arieli Group. The Arieli Group, through its subsidiary Arieli I.L., holds approximately 58% of Elron. The three partners in Arieli Group each hold an equal one-third stake, meaning two partners voted against the third. The seven-member board, including four independent directors, approved the resolution. Bachar Menuch will remain on the board as a regular director.

Bachar Menuch raised objections regarding the timing of the vote, potential conflicts of interest, and alleged extraneous motives by Renob and Bentov. The two directors dismissed her claims, asserting their decisions were business-driven and aimed at benefiting the company. Bachar Menuch has sent a notice of legal action, suggesting the dispute may escalate to court.

Two new directors have joined Elron's board: Ido Heller, formerly a senior partner at PwC Israel, appointed as an independent director, and attorney Yaniv Rog. Additionally, Dana Garner, former CFO of Cellebrite, is slated for approval as an external director at the upcoming general meeting, replacing Ronit Ritz-Bueno.

The underlying issue stems from the financing of Arieli Group's acquisition of Elron shares. In September 2024, Arieli Group purchased the 58% stake from DCL for about $53 million, partially financed by a NIS 90 million loan from The Phoenix Investments. Elron shares were pledged as collateral. However, Elron's stock price has fallen by roughly half in the past year, reducing the collateral's value to approximately NIS 90 million, close to the original loan amount. This triggered a breach of financial covenants, prompting The Phoenix to demand repayment, capital injection, or seizure of the pledged shares. Renob and Bentov reportedly contributed NIS 20 million to reduce the debt and secured an extension until the end of October, but a remaining balance is still outstanding.

Renob and Bentov have previously accused Bachar Menuch of opposing a settlement arrangement and attempting to sell the pledged shares to a third party at a lower price. Conversely, Bachar Menuch filed a police complaint alleging threats against her and her family by the two partners.

Elron's strategy under Bachar Menuch shifted focus from medical devices and software to defense technology, deep tech, and cyber, in partnership with Rafael. The company has divested six holdings, made around 20 new investments totaling approximately $12 million, and distributed about $30 million in dividends over two years. A joint venture with Rafael, RDC, is set to pursue defense tech acquisitions potentially up to $300 million.

Elron's price-to-earnings ratio is around 5, considered low for a tech holding company, reflecting market concerns about control and the ongoing dispute. The immediate questions are whether Arieli Group will reach a debt settlement by month's end and the outcome of Bachar Menuch's legal notice.