Arieli Group reaches settlement with Phoenix, and its controlling shares in Elron will not be sold
The Arieli Group has reached a framework agreement with Phoenix Investment House to settle debts, ensuring it retains control of Elron. The lender had previously demanded repayment due to a decline in the value of the pledged shares.
A solution appears to be emerging for the loan issue that the Arieli Group took from Phoenix Investment House to acquire control of the technology investment company Elron. Elron announced that the controlling shareholder informed it that it had reached a framework that settles its debts to the lender, which are secured by a lien on the company's shares owned by the Arieli Group.
The Arieli Group holds 58.4% of Elron's shares, with the company currently traded at a valuation of 205 million shekels. For the acquisition of control in Elron, which was carried out for 53 million dollars in September 2024, Arieli took a debt of 90 million shekels. Arieli pledged its controlling shares as collateral, which were worth double the loan amount at the time.
The loan terms set financial covenants that Arieli must meet. As long as Elron was traded at a value close to the purchase price, there was no issue, but the stock has since fallen by 32% year-to-date, despite a 27% recovery since the beginning of August.
It was recently revealed that the Arieli Group was not meeting the loan terms, and Phoenix was offering the pledged controlling shares for sale to market participants. Phoenix Investment House demanded that Arieli repay the loan or inject capital to reduce Elron's loan-to-value (LTV) ratio to meet the required terms.
While Elron did not detail the arrangement, it is likely that it involves third parties lending Arieli a sum equal to about 20% of the shares, which Arieli will transfer to Phoenix to lower the company's debt-to-balance ratio. Arieli is also examining other alternative solutions, meaning the deal is not yet finalized. The public exposure of the conflict helped Phoenix receive a faster response from Arieli, which had delayed the solution for nearly two months.
Elron, managed by Yaniv Schneider, holds varying percentages in 17 technology companies, including EdiOnix, OpenLegacy (via RDC, a partnership with Rafael), Axonius, BrainsGate, and Wonder Robotics. The Arieli Group, a third-generation American family fund, began comprehensive changes immediately after the acquisition, transforming the company from a passive investor into an active partner.
