Investors Signal Doubts as G City Takeover Faces Challenges Amid High Debt

Lawyers representing Haim Katzman, controlling shareholder of G City, sent a letter last weekend to Tzachi Abu, who is seeking to acquire the company alongside partners Yaron Adib and Kidan Dahari. The letter demanded details of an agreement signed about two weeks ago between Abu's Ari Nadlan and the company Yespro, controlled by Adib and Dahari, regarding joint control of G City.

Katzman, who previously made an 82 million shekel exit from Novolog, is now aiming to take over G City. A source close to the deal told Globes that Katzman underestimated Abu, contrasting him with Barak Rozen, who unsuccessfully attempted a takeover of G City years ago alongside Assi Tuchmaier. Investors initially reacted positively to the acquisition news, with G City's stock surging over 20% in early July. However, following recent reports of difficulties in the deal, the stock has fallen back, erasing all gains and trading below its pre-deal value.

Market participants appear to believe the buyer group can reduce G City's heavy leverage, which stands at over 20 billion shekels, or 75% debt-to-equity ratio. Reducing leverage is a key goal for the buyers. Kidan Dahari told Globes two weeks ago that the company had focused too much on financial maneuvers and organizational structures, and the new management intends to return G City to a leading real estate firm by dramatically cutting expenses and leverage. Dahari added that he and Abu plan to manage the company hands-on and sell foreign assets.

G City's stock has underperformed the local market significantly, dropping over 50% in the past five years while the TA-125 index rose more than 130%. This poor performance led to the company’s removal from the main stock exchange indices. The ongoing takeover battle and financial restructuring efforts highlight the challenges facing G City as it seeks to stabilize and regain investor confidence.