Discount Investments Plans Rights Issue and Dividend in Kind to Unlock Half-Billion Shekel Value
Discount Investments (D.I.S.K.) announced approval of a principal framework for a rights offering aimed at repaying over 400 million shekels in company liabilities. Concurrently, it will distribute shares of its subsidiary, Nakhassim U’Binyan, as a dividend in kind to shareholders, primarily real estate firms Mega Or and Elco Holdings. If successful, D.I.S.K., once a major holding company controlling Shufersal, Cellcom, and Elron, will become a debt-free shell company valued at only a few million shekels.
Nakhassim U’Binyan holds two key assets: the Bryant 10 office tower in Manhattan and controlling shares in Gav-Yam, a leading commercial real estate company serving mainly the high-tech sector. Gav-Yam’s market value stands at 5.2 billion shekels, while Nakhassim U’Binyan trades at 2.3 billion shekels, about one billion shekels below its equity value. Market estimates indicated a 25%-27% discount on D.I.S.K.’s holdings prior to the dividend announcement. The dividend in kind is designed to bring shareholders closer to the core asset and unlock hidden value.
Simultaneously, shares of Delek Initiatives, a new public company holding royalty rights from the Leviathan gas reservoir, began trading after being distributed as a dividend in kind to Delek Group shareholders, led by Yitzhak Tshuva. The shares surged over 700% on their first trading day, reflecting investor recognition of the royalties’ value. This move also reduced Delek Group’s net liabilities by approximately 220 million dollars and increased its equity accordingly.
The dividend in kind mechanism, which transfers assets rather than cash to shareholders, is a common strategy in Israel to reveal hidden asset value and avoid complex multi-layer holding pyramids. Past examples include Orion’s shares to G City shareholders and the 2008 distribution of Delek Real Estate shares to reduce debt during the global financial crisis. Discount Investments’ current restructuring follows a similar path, aiming to reduce debt and enhance shareholder value by simplifying its structure and focusing on core real estate assets.
The article also notes opposition from Mercantile Bank employees to a merger with Discount Bank and highlights the broader context of dividend in kind distributions in Israeli corporate finance, emphasizing their role in unlocking value and restructuring ownership layers.
