G-City stock illustrates: Investors have a clear message for Chaim Katzman
After reports that the G-City deal is in danger, the income-producing real estate company's stock is falling sharply in Tel Aviv. It seems that investors are sending a clear message to Chaim Katzman, the founder and owner: We want the deal.
At the end of the week, the lawyers of Chaim Katzman, the controlling shareholder of G-City, sent a letter to Tzahi Abu, who is seeking to acquire the company together with two partners — Yaron Adiv and Kidan Dahari. In the letter, they demanded that Abu provide the details of the agreement that Ari Nadlan, controlled by Abu, signed about two weeks ago with the Ishpro company of Adiv and Dahari, regarding joint control of G-City.
A source close to the deal told Globes this week:
"If Katzman thought that Abu was Barak Rosen, he was wrong and wrong in a big way; there is someone here now who has managed to crack the nut."
By this, he refers to the unsuccessful takeover attempt of G-City by Israel Canada, owned by Barak Rosen and Asi Tuchmair, several years ago.
As far as the investors are concerned, it seems they are interested in completing the deal. On the day the agreement was reported in early July, G-City shares jumped by over 20%. And today (Monday), the first trading day after the reports of difficulties in the deal, the stock is falling, having effectively wiped out all the price gains since the deal was first known. The company's stock is now trading below the value at which it traded on the eve of the deal.
It seems that the market believes that the group of buyers will succeed in lowering the leverage of G-City, whose debts stand at more than 20 billion shekels, putting the leverage ratio at 75%. Reducing leverage is one of the main goals set by the group of buyers. About two weeks ago, Kidan Dahari told Globes:
"For many years the company concentrated on financial moves and organizational structures; we want to return it to being a leading real estate company. From the moment we take the reins, we will dramatically reduce expenses and leverage."
"We want to stabilize the company in terms of management, when Tzahi and I will manage the company on an ongoing basis, and will be 'hands-on' with the assets. And of course, in parallel, we will act to sell assets abroad," declared Dahari in that conversation.
The debts of G-City have weighed on the stock in recent years and it has underperformed relative to the local market. Thus, while the TA-125 index has jumped in the last five years by more than 130%, G-City shares have crashed by more than 50% in the same time. As a result, the company was recently removed from the leading indices of the stock exchange.
