Arkia's Controlling Nakash Family Explores Stock Shell Merger Amidst Internal Dispute
Translated & summarized from Calcalist by baba
The Nakash family, controlling Arkia Airlines, is exploring a merger with a stock shell company as an alternative to a sale, potentially injecting tens of millions of shekels. This comes amid internal family disputes and opposition from employees who hold a significant stake and are threatening a labor dispute over capital dilution. Arkia previously attempted a similar merger in 2022, which failed. A merger with competitor Israir is seen as a better option by some but faces regulatory challenges.
The story in 6 lines · by baba
- Arkia's controlling Nakash family is exploring a merger with a stock shell company.
- The potential merger involves injecting tens of millions of shekels into the airline.
- Two Nakash brothers oppose a sale to Lerner, Varour, and Elkiam, while employees support it.
- Employees, holding 22% of Arkia, threaten a labor dispute over capital dilution.
- A previous merger attempt with a shell company failed in 2023.
- A merger with competitor Israir is considered but faces regulatory obstacles.
The Nakash family, which controls Arkia Airlines, is exploring a merger with a publicly traded shell company as an alternative to a potential sale. This move, if finalized, would involve injecting tens of millions of shekels into Arkia, raised from the public by the shell company. Shlomi Fogel, a partner of the Nakash brothers in Ampa and controller of Israel Shipyards, known for his expertise in corporate turnarounds, may join this venture. The exploration comes amid opposition from two of the three Nakash brothers, Joe and Rafi, represented by Avi Khurmo, to a potential deal with the Lerner group, the Varour family, and Avi Elkiam.
Arkia had previously considered a merger with Technoplast Ventures in December 2022, valuing the airline at 150-200 million shekels. However, those talks ceased in August 2023, shortly before a planned signing, due to disagreements involving the Nakash brothers and one of the shell company's owners, Eran Meital.
An imminent capital injection by the Nakash family is expected to cause significant dilution for employees, who currently hold a 22% stake in Arkia through the T.U.T. corporation. The employees oppose this dilution, deeming it illegal, and are preparing to declare a labor dispute that could harm the company. Avi Edri, leading the employees, sent a letter to the Nakash family emphasizing their refusal to relinquish their rights. Industry sources warn that employee actions could be devastating for Arkia, which is already facing a capital deficit of approximately $60 million.
While employees favor the deal with Lerner, Varour, and Elkiam, Joe and Rafi Nakash oppose it, stating no current negotiations are underway with them. This contradicts Avi Nakash's prior involvement and agreement to the talks. A spokesperson for the brothers stated, "There are no negotiations today between the three brothers and the Lerner group for the sale of Arkia."
The Nakash brothers view a sale or merger with Israir as a preferable solution, though such a merger faces significant hurdles. The Israel Competition Authority would likely not permit it unless Arkia is declared a "failing firm," a designation for companies with no other viable purchase offers. However, Arkia is not currently in that situation, as Lerner, Varour, and Elkiam are prepared to acquire the company and have an initial agreement framework. Arkia's proponents for a merger argue that both airlines already operate a route to Eilat, joined by Air Haifa, with El Al also capable of operating the route. The Israel Airports Authority's employee union had also previously explored acquiring Arkia.
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