Alfred Akirov Takes Real Estate Firm Private Amid Lawsuit Over Share Value

Businessman Alfred Akirov is set to complete the privatization of his company, Alrov Real Estate and Hotels, this week, three years after its initial public offering. The company's shares will be delisted from the Tel Aviv Stock Exchange on Wednesday, November 4, following the successful completion of a tender offer for publicly held shares. However, as Akirov achieves his goal, he faces a significant legal challenge that could cost tens of millions of shekels.

The privatization process began in late September when Akirov announced his intention to acquire the remaining Alrov shares held by the public. The offer priced shares at NIS 322.41 each, valuing the company at approximately NIS 6.64 billion, with the total consideration for the nearly 2.45 million shares amounting to about NIS 788 million. The offer met the legal threshold, allowing for the compulsory acquisition of shares from minority shareholders who opposed it.

Despite the delisting, a dispute over the share valuation has emerged. Walter Team, a shareholder that opposed the tender offer, has filed a request for approval of a class-action lawsuit against Akirov and his private companies. The plaintiffs allege that minority shareholders were forced to sell their shares at a price below their fair value.

According to the lawsuit filed by attorneys Lior Lahav and Hadar Stamp, the equity attributable to Alrov shareholders at the end of June was approximately NIS 7.38 billion. The tender offer, however, reflected a valuation NIS 738 million lower. An economic opinion attached to the request estimates the fair value of an Alrov share at NIS 357.94, an 11% premium over the NIS 322.41 paid. The initial compensation claim for shareholders forced to sell is around NIS 11.72 million, but a broader claim, including allegations of disclosure violations, could escalate the total lawsuit amount to approximately NIS 86.9 million.

A key point of contention is the early agreement of the investment house Meitav to the tender offer. The plaintiffs argue that Meitav, which acquired its holdings at a significantly lower price, cannot serve as an indicator of fair value for other shareholders. Beyond the privatization, Alrov is a major shareholder in Clal Insurance, holding about 14%. Akirov has long sought control of the insurance company, and privatizing Alrov may facilitate a restructuring of holdings and a separation of Clal shares from Alrov's public debt, potentially easing regulatory hurdles for his control bid.

While Alrov's shares will be delisted, its bond series will continue to trade, and the company will remain a reporting entity. Akirov must now navigate both his ambition to control Clal Insurance and the ongoing legal battle with minority shareholders, the outcome of which is yet to be determined.