TEL AVIV, Israel, Jan. 10, 2025 /PRNewswire/ -- The Tel-Aviv Stock Exchange Ltd. (TASE: TASE) (The Company) hereby announces that, on January 9, 2025, it entered into a transaction with Manikay Global Opportunities Holdings 1, LLC (hereafter: "Manikay Fund") for the buyback of 4,622,028 ordinary shares of the Company (hereafter: "the Purchased Shares"), representing 4.82% of the issued share capital of the Company (excluding dormant shares held by the Company), at a price of 43.79 NIS per Purchased Share and for a total consideration of 202.4 million NIS (hereafter: "the Buyback Transaction" or "the Transaction"). The Transaction was executed as an OTC transaction.
Presented below are data and details in relation to the Buyback Transaction, its financing, the manner of its approval and data and considerations taken into account as part of its execution:
General Background
1. Manikay Fund is the largest shareholder in the Company, which has held shares of the Company since August 2018, in accordance with the Israel Securities Authority's permit for holding shares of the Company at a rate of up to 19.99% of the issued share capital of the Company. To the best of the Company's knowledge, prior to the execution of the Transaction, Manikay Fund held approximately 19.29% of the issued share capital of the Company (excluding dormant shares held by the Company).
2. Taking into consideration the date of establishment of Manikay Fund and the customary duration of operation of investment funds of its type, the Company has initiated an offer to Manikay Fund for the buyback of part of its holdings in the shares of the Company.
Effect of the Transaction on the Holdings of Equity and Voting Rights of the Company's Equity Holders
3. Shares purchased under a buyback transaction become dormant shares, within the meaning of this term in the Companies Law, 1999 ("the Companies Law"), which while held by the Company confer no rights on the Company (whether in equity or voting rights).
4. On the one hand, following the execution of the Transaction, Manikay Fund's percentage holding decreased to approximately 15.2% of the issued share capital of the Company (excluding dormant shares held by the Company, including the Purchased Shares).
5. On the other hand, due to the Purchased Shares becoming dormant shares, the percentage holdings of the other equity holders in the Company are expected to increase by a uniform rate of approximately 5.07% of the issued share capital of the Company (excluding dormant shares held by the Company, including the Purchased Shares).
6. It is hereby clarified that if any of the equity holders in the Company holds close to 5% of the Company's issued share capital (or a rate that is close to the maximum rate stipulated in the holding permit that it had received, hereafter: "the Stipulated Rate"), then it is possible that as a result of the execution of the Transaction its percentage holding has increased to 5% or more (or over the Stipulated Rate, as appropriate) of the issued share capital of the Company (excluding the dormant shares). The rate of such increase in excess of the rate that mandates the receipt of a holding permit or the Stipulated Rate shall be hereafter referred to as "the Excess Holding". Where an Excess Holding arises to an equity holder, as above, the equity holder is required to apply to the Israel Securities Authority for a holding permit (or for the amendment thereof, as appropriate), in accordance with the provisions of Section 45G of the Securities Law, 1968 (provided that the equity holder qualifies for the receipt of such permit) or to sell the Excess Holding. Pending the receipt of such holding permit, the Excess Holding will not confer any rights upon the equity holder (whether equity or voting rights).
Financing of the Transaction
7. Since the TASE Group holds substantial available cash balances, the Company is able to finance the Buyback Transaction from the own resources of the TASE Group. Nevertheless, in order to maintain the Company's financial flexibility and avoid a substantial realization of marketable investment portfolios, the Company entered into an agreement with a bank (hereafter: "the Bank") for the receipt of a loan in an amount of NIS 130 million (hereafter: "the New Loan"). The New Loan will be used by the Company to fully repay an existing loan to a bank, with a balance (principal of interest) of approximately NIS 100 million as of the date of the report (hereafter: "the Repaid Loan"). In addition, in order to maintain a positive cash balance at the level of the Company (stand-alone), a wholly-owned subsidiary of the Company distributed to it a dividend of NIS 30 million out of its liquid balances.
The New Loan bears annual interest at the rate of Prime plus a margin of 0.2%, which is lower than the margin of the Repaid Loan (0.5%), and shall be repayable commencing on 9.2.2025 in 36 equal monthly principal payments, with the addition of the interest. The New Loan contains undertakings with similar characteristics (and even more favorable characteristics, as described below) to those prescribed for the Repaid Loan, including an undertaking to refrain from pledging the TASE building and an undertaking to comply with covenants that are calculated in relation to the Company's (stand-alone) data, as described below, which will examined commencing on 31.3.2025. In the assessment of the Company, it is likely to comply with all covenants on 31.3.2025.
Presented below are details of the covenants included in the New Loan, as well as a pro forma calculation of the degree of compliance therewith, based on the data of the Company's (stand-alone) financial statements as of 30.9.2024, assuming the obtaining of the New Loan, the settlement of the Repaid Loan, the receipt of the dividend from the subsidiary and the execution of the Buyback Transaction:
Covenant
Description of covenant
Required ratio
Pro forma ratio calculation based on data for 30.9.2024
Ratio of equity to total assets
The Company has undertaken to maintain a minimum ratio of equity to total assets
45 %
59 %
Debt coverage ratio
The Company has undertaken to maintain a maximum ratio of the balance of its non-subordinated liabilities to banks, financial institutions and other lenders, including equity holders/related parties in the operating profit to debt servicing
2.5
1.1
Debt servicing ratio(*)
The Company has undertaken to maintain a minimum ratio of operating profit to debt servicing with the addition of the balance of cash and cash equivalents and financial assets at fair value through profit or loss (T-bills and government bonds), in the debt servicing (current maturities of the loan including financing expenses payable according to the loan's repayment schedule).
1.25
3.8
* In accordance with the terms of the Repaid Loan, the debt servicing ratio was calculated net of the receipts received in recent years from the sale by TASE members of Company shares that they had received as part of the arrangement for the restructuring of TASE from 2018 (hereafter: "the Arrangement Shares"). In accordance with the terms of the New Loan, such receipts will be taken into account in determining the compliance with said covenant, making compliance with said covenant significantly more easy to attain.
8. In addition, since the balance of the receipts from the sale of the Arrangement Shares, which is designed to finance the investments in the TASE Group's IT systems cannot be included in the liquid means of the TASE Group for purposes of the compliance with the Capital and liquidity Requirements, the Company has also entered into an agreement with the bank for the receipt of a credit facility of NIS 120 million (hereafter: "the Credit Facility"). In respect of the Credit Facility, the Company will pay a setting-up ("non-utilization") fee in an amount equal to 0.33% of the amount of unutilized credit therein. In the event of utilization of the Credit Facility, the credit amounts will bear interest at an identical rate to that of the New Loan. The Company's undertakings to the Bank in respect of the New Loan shall also apply in relation to the Credit Facility.
9. To complete the picture, it should be noted that the terms of the New Loan and the Credit Facility (including its legal and financial terms) were finalized following the receipt of quotes from two additional banks (one of which is the provider of the Repaid Loan). It is further noted that the terms of the New Loan and the Credit Facility were the most favorable to the Company, and therefore can be assumed to reflect market terms. Accordingly, the obtaining of the New Loan and the Credit Facility (while settling the Repaid Loan), would have been carried out independent of the Buyback Transaction.
The manner of approval of the Buyback Transaction
10. A buyback of the company's shares constitutes a distribution, as defined in the Companies Law, and is therefore subject to the fulfillment of the profit criterion and the solvency criterion, similarly to a decision on a dividend distribution.
11. In addition, since Mr. Salah Saabneh, who serves as a director in the Company, is an officer in Manikay Group and holds interest in Manikay Fund, he may be considered as having personal interest in the Buyback Transaction. Accordingly, the Buyback Transaction was approved as an extraordinary transaction in which a director in the Company has personal interest, both by the Audit Committee and by the Company's Board of Directors (following its examination in relation to Capital and Liquidity Requirements' aspects by the Board of Directors' Risk Management Committee).
12. During the discussions of the Transaction, the opinion of an Israeli investment house, which is highly experienced in the execution of distribution transactions or coordination of purchases of parcels of shares that are traded on TASE, was presented, pursuant to which this type of transaction is customarily executed based on the average price of the shares over a specified period close to the date of the transaction, with the addition of or net of a specified rate of up to 5% (hereafter: "the Professional Opinion"). This approach is designed to ensure that the price of the Transaction reflects the recent market terms of the Company's share, while moderating the effect of non-recurring fluctuations.
Information on the Examination of the Company's Compliance with the Distribution Criteria
13. Following the presentation to the members of the Committees (the Risk Management Committee and the Audit Committee) and the Board of Directors of relevant data from the consolidated financial statements of the Company as of 30.9.2024 and its (stand-alone) financial data as of 30.9.2024, following the presentation of a report on the projected cash flow of the Company for the period from 30.9.2024 to 31.12.2028, including consideration of the Capital and Liquidity Requirements, both in light of regulatory requirements that apply to companies in the TASE Group and based on models established by the Company (above and below, collectively: "the Capital and Liquidity Requirements"), and the review of the additional aspects of the Buyback Transaction, the Board of Directors has determined, inter alia, as follows:
13.1. As regarding the "profit criterion", it should be noted that, as of 30.9.2024, the Company's profits available for distribution (pre-distribution) total approximately NIS 324.5 million. The amount of the Buyback Transaction totals approximately NIS 205 million.
13.2. As regarding the compliance with the "solvency criterion", it should be noted that the members of the Committees and the Board of Directors have examined, inter alia, the reviewed financial statements of the Company as of 30.9.2024 (consolidated and stand-alone) and the related explanations provided by management of the Company, including examination of the retained earnings available for distribution, the cash flow projection for the Company for the period ending at the end of 2028, the equity attributable to the equity holders, the Capital and Liquidity Requirements and the total working capital in the Company's stand-alone financial data as of 30.9.2024. In this context it has been noted that, in general, the activity of the Company is not characterized by material consumption of credit and that, as of the date of the resolution, the Company has no financial obligations that extend beyond the examination period and therefore there are no reasonable grounds to assume that the Company would not be able to meet its anticipated obligations even after the examination period.
13.3. In addition, the members of the Board of Directors examined the ability of the Company to meet its existing and anticipated cash needs (even under stringent scenarios, and the application of sensitivity tests concerning critical working assumptions) and without taking into account the ability of the Company to obtain additional credit.
13.4. Furthermore, the members of the Board of Directors believe that the Buyback Transaction is not likely to have a material adverse effect on the Company's financial position, including its capital structure, its leveraging ratio, its liquidity and its ability to continue operating in the existing format.
13.5. Pursuant to the stated above, the members of the Board of Directors have determined that the execution of the Buyback Transaction meets both the profit criterion and the solvency criterion as required under the provisions of Section 302 of the Companies Law.
Summary of the reasonings for the Buyback Transaction
14. The price of the Buyback Transaction, of 43.79 NIS per share, was determined in negotiations with Manikay Fund. This price reflects the weighted average price over the last 30 trading days (excluding the transaction date) and taking into consideration that it is within the range prescribed in the Professional Opinion, and that the latest closing price of the Company's share on January 9, 2025, the transaction's date was 43.01 NIS, it reflects the recent market terms of the Company's share.
15. Taking into consideration the plans of the Company, the cash surpluses and the capital in excess of the Capital and Liquidity Requirements, the venues that are available to the Company for the investment of the surpluses, the yields that they will generate, and the Company's budget and work plans for 2025, as well as the five-year strategic plan for 2023-2027, and in light of the recent state of the Israeli capital market, in general, and the recent prices of the Company's share, in particular, the Company also deems the share buyback as a business opportunity for the benefit of the equity holders that could create value while also improving the financial indicators that are used by investors and analysts to examine the Company, such as the return on equity and effective leveraging ratio (equity-assets ratio).
16. As explained above, the Buyback Transaction enhances Manikay's ability to manage its long-term shareholding in the Company, and reduces the risks to the Company and its shareholders involved in a potential disposal of a large holding.
Contact: Orna Goren Head of Communication and Public Relations Unit Tel: +972 76 8160405 tase.ir@tase.co.il
