Gi City Deal Near Collapse Amid Trust Breakdown Between Partners Katzman and Abu
The Gi City acquisition deal is on the verge of collapse less than a month after its signing, as trust rapidly deteriorates between the two main parties, Haim Katzman and Tzahi Abu. Katzman has requested through his lawyers that Abu transfer the agreement between Abu and the owners of Yesphro, Keidan Dahari and Yaron Adiv, who were included in the deal by Abu. Abu refuses to hand over the agreement, insisting that Katzman’s commitment to the deal is sufficient. Sources close to the deal view Katzman’s demand as a first step toward canceling the agreement, which could lead to a legal dispute.
Abu also perceives Katzman’s recent move to raise 261 million shekels through bonds as unnecessary, since the company is already planning a larger capital raise of one billion shekels. Abu feels Katzman is attempting to appropriate strategic company moves before the deal is finalized. Abu criticizes the employment contract of CEO Keren Kalifa, who is set to earn an annual salary of 4.4 million shekels starting in October, and the allocation of 230,000 shares to Katzman’s protégé, Adi Yemini, approved at a shareholders’ meeting. Abu, Dahari, and Adiv plan to drastically reduce overhead costs, general management expenses, and senior executives’ salaries, a move Katzman opposes.
According to sources, Katzman expected a joint control model, assuming Abu would not exercise his option to purchase an additional 7% stake. The deal’s structure involves Ari Real Estate, controlled by Katzman, initially buying 26% of Gi City from Norstar for 661 million shekels, with an option to buy about 7% more for 200 million shekels after six months, potentially giving Ari control. Katzman assumed Abu would not exercise this option because it would require consolidating Gi City’s massive debts (9 billion shekels solo, 24 billion consolidated) into Ari Real Estate’s financials. However, including Yesphro in the deal allows exercising the option without consolidating the debts, which could lead to Katzman losing control, contrary to his original plan to co-manage the company with Abu.
Abu describes the company as wasteful, with excessive perks for Katzman’s associates, and was unwilling to accept that. Abu’s supporters claim he made it clear from the start that he intended to acquire control, not share it. They also assert Katzman will eventually have to step aside, along with Kalifa and Katzman’s other associates. Abu has deposited 20 million shekels in escrow with Norstar and plans to demand its return.
Summary: The Gi City acquisition deal between Haim Katzman and Tzahi Abu is collapsing amid mutual distrust, disputes over agreements and company management, and conflicting visions of control. Katzman’s expectation of joint control clashes with Abu’s intent to gain full control, risking legal battles and company instability.
