IDB Pyramid Faces Dismantling


IDB Development Corporation’s new owners, Eduardo Elsztain and Moti Ben-Moshe, have given notice that in compliance with the new Business Concentration Law, they would likely lose control of the Super-Sol unit within the next six months, Haaretz reported on Monday.

The Business Concentration Law requires holding companies like IDB, that are structured like pyramids, to appoint a majority of outside directors to the boards of the companies they own.

However, since precise interpretation and implementation of the anti-pyramid law is still being developed, it was unclear how it would affect IDB.

“At this stage, we cannot say with any certainty when the process will be completed nor can we estimate what effect these issues will have on future financial results or the timing of their impact,” IDB said.

Loss of effective control would mean that IDB would have to record a charge of about 150 million shekels. That is because accounting rules require the company to value Super-Sol on its books by its share of the retailer’s market value, which today is about 1.377 billion shekels, rather than its book value, which was 1.532 billion shekels in its last financial report.

In the IDB pyramid, IDB Development controls Super-Sol via a 73% stake in Discount Investment Corporation. Discount, in turn, controls 47% of Super-Sol, making it the single biggest shareholder. Another 19% is controlled by Isralom, a company controlled by Canadian Matthew Bronfman.