Entry of Dehari and Adiv into G City Deal Sparks Tension Between Katzman and Abu
Kidan Dehari and Yaron Adiv, through Yespro-Tanofort, joined Ari Nadlan, controlled by Tzachi Abu, in acquiring control of G City, creating tension between Haim Katzman, who is selling his stake, and Abu. Earlier this month, Katzman and Abu signed an agreement for Ari Nadlan to purchase 26% of G City shares from Norstar, controlled by Katzman, for 661 million shekels, with an option to buy an additional 7%. Abu later added Dehari and Adiv equally, each acquiring 13% initially. The first payment stage totals 230 million shekels, followed by 431 million shekels six months later.
Katzman was informed of Dehari and Adiv’s involvement only after they signed with Abu, just before the stock exchange announcement, which he disliked, especially since he was undergoing medical tests at the time. Katzman claimed there was no prior consultation despite his expected partnership with the three. His frustration also stems from Dehari and Adiv approaching him first to buy G City control, which he declined due to Yespro’s small size and other reasons. Abu and Dehari-Adiv’s camp maintain the move complies with the agreement and is legitimate.
Katzman faces a dilemma: the agreement with Abu likely allows adding partners, but he expected institutional investors without management ambitions. The two-stage deal complicates matters, leaving Katzman with 28.5% after the first stage, partnering with Abu, Dehari, and Adiv. After six months, the buyers may exercise the option to reach 35% ownership and control. Norstar will retain 19.5%, remaining a significant partner. Katzman initially hesitated about Abu but proceeded after a senior banker’s recommendation.
Abu, via Ari Nadlan, raised nearly 500 million shekels from institutional investors and self-funding. Katzman supports completing the deal, seeing it as favorable pricing for Norstar’s 54.5% stake. However, exercising the option triggers bondholders’ right to demand immediate debt repayment; G City holds about one billion shekels in bonds. A source close to G City criticized Abu’s approach, saying better communication with Katzman would ease cooperation and decision-making.
The July deal set Ari Nadlan’s purchase price at 14.95 shekels per share, a 30% premium, valuing G City at 2.55 billion shekels, above its current 2.16 billion shekel market value. Abu required a capital injection of one billion shekels post-first stage, with Norstar and Ari Nadlan committing 540 million shekels. Yespro-Tanofort still needs nearly 300 million shekels, possibly through institutional partners or debt, with Katzman awaiting their success.
Sources note Dehari and Adiv are not favored by Katzman, creating significant tension. Yespro’s negative FFO due to high financing costs adds complexity. Katzman wants the deal to succeed but doubts its completion due to its complexity and risks at each stage. Market observers also noted G City’s management expenses ratio is higher than Yespro and Ari Nadlan’s, despite plans to cut these costs by two-thirds from 300 million to 100 million shekels annually.
G City remains a major real estate company with 85 income-producing assets across four continents valued at about 30 billion shekels, including properties in Israel, Poland, Finland, Norway, Sweden, Estonia, Denmark, the US, Canada, and Brazil.
