Less than a month after it was signed: The G City deal is on the verge of collapse
The G City deal is on the verge of collapse as trust between Chaim Katzman and Tzahi Abu deteriorates rapidly. The parties are in conflict over management control, corporate strategy, and planned executive salary cuts.
The G City deal is on the verge of collapse. Calcalist has learned that the trust between the two parties, Chaim Katzman and Tzahi Abu, is deteriorating rapidly.
It was also learned that Katzman requested from Abu, through his lawyers, to provide him with the agreement between Abu and the owners of Ishpro — Kidan Dahari and Yaron Adiv, whom Abu brought into the deal. Abu is not willing to provide the agreement, claiming that his commitment to the deal is sufficient. Sources close to the deal see this demand as Katzman's first step toward canceling it, which could lead to a lawsuit.
Abu views the move by G City, led by Katzman this week, to raise 261 million shekels in bonds as unnecessary, given that the company is already planning to raise 1 billion shekels in capital. He feels that Katzman is trying to execute strategic moves before the deal is finalized. Specifically, he considers the employment agreement of CEO Keren Khalifa, with an annual salary of 4.4 million shekels, to be excessive, as well as the allocation of 230,000 shares to Katzman's protégé, Adi Yamini.
Abu, Dahari, and Adiv intend to dramatically reduce overhead and executive salaries, which Katzman opposes. According to those close to the deal, Katzman built on a model of joint control, assuming Abu would not exercise the option to purchase an additional 7% of shares.
Under the deal structure, in the first stage, Ari Nadlan acquires 26% of G City from Norstar (controlled by Katzman) for 661 million shekels. After six months, there is an option to purchase an additional 7% for 200 million shekels, which would grant control. Katzman assumed Abu would not exercise this option to avoid consolidating G City's reports, which include debts of 9 billion shekels (solo) and 24 billion (consolidated). However, the entry of Ishpro allows Abu to exercise the option without consolidating reports, effectively ending Katzman's control.
"Katzman will go home, and so will Keren and all his associates," sources close to Abu told Calcalist today.
Abu deposited 20 million shekels in trust with Norstar, and he intends to demand them back.
