BSD.L Regulatory News (BSD)

EMBLAZE LTD (LSE:BLZ) ("Emblaze" or the "Company") PROPOSED INVESTMENT IN IDB Herzeliya, Israel, 4 November 2013. Capitalised terms will have the meanings ascribed to them in the Appendix tothis announcement. The Proposed Transaction On 3 November 2013, IDB submitted to the Court a proposal (the "Proposal"), onbehalf of a consortium of investors led by the Company (the "Consortium"), toacquire a controlling stake in IDB (the "Proposed Transaction"). The Proposal comprises two alternatives: Alternative 1 The Consortium will invest NIS 1,170,000,000 based on an IDB valuation of NIS1,090,000,000 (the "Alternative 1 Valuation") as follows: At closing of the Proposed Transaction ("Closing"), the Consortium will investNIS 900,000,000 (the "Alternative 1 Closing Payment"). In the event thatproceeds exceeding NIS 1,000,000,000 from the sale of shares of Clal InsuranceEnterprises Holdings Ltd ("Clal") are received by IDBD (the "Clal Closing") by1 June 2014, then, out of the Alternative 1 Closing Payment: NIS 150,000,000will be paid to IDBD and NIS 750,000,000 will be paid to the IDB creditors. Inthe event that the Clal Closing does not occur by 1 June 2014, out of theAlternative 1 Closing Payment, up to NIS 650,000,000 will be paid to IDBD andNIS 250,000,000 will be paid to the IDB creditors, who will also receiveadditional IDBD shares (as further detailed below).In order to provide for suchmechanism, certain funds will be put into escrow at Closing. Furthermore, up to an additional NIS 270,000,000 (the "Alternative 1Post-Closing Payment", and together with the Alternative 1 Closing Payment, the"Alternative 1 Payment") will be paid to the IDB creditors within 36 months ofClosing, of which at least NIS 135,000,000 will be paid within 18 months ofClosing, by way of tender offers to be made by Newco at a price per share basedon the Alternative 1 Valuation plus all amounts paid into IDBD by theConsortium. Pursuant to this Alternative 1, upon Closing, the Consortium members will hold94.4% (if the Clal Closing does occur by 1 June 2014) or 67.2% (if the ClalClosing does not occur by 1 June 2014) of the issued share capital of IDBD, theremainder will be held by the IDB creditors. Pursuant to this Alternative 1, the IDB creditors will also be granted IDB'scash reserves (minus certain expenses) and any net amounts which IDB mayreceive as a result of legal proceedings to which it is a party the basis ofwhich predates Closing. Alternative 1 includes a penalty mechanism in case the Consortium fails to paythe Alternative 1 Payment in full, whereby the Consortium will pledge in favourof the IDB creditors IDBD shares equal to 25% (in case of Alternative 1 ClosingPayment) or 50% (in case of Alternative 1 Post-Closing Payment) of the unpaidamount based on the Alternative 1 Valuation plus all amounts paid into IDBD bythe Consortium. Alternative 2 The Consortium will invest up to NIS 1,550,000,000 based on an IDB valuation ofNIS 900,000,000 (the "Alternative 2 Valuation"), as follows: At Closing, NIS 350,000,000 will be paid to the IDB creditors, NIS 150,000,000will be paid to IDBD, and an additional NIS 400,000,000 will either be paid tothe IDB creditors if the Clal Closing occurs by 1 June 2014, or, if the ClalClosing does not occur by 1 June 2014, to IDBD (the "Alternative 2 ClosingPayment"). In order to provide for such mechanism, certain funds will be putinto escrow at Closing. If the Clal Closing occurs by 1 June 2014, an additional NIS 150,000,000 willbe paid to the IDB creditors within 12 months of Closing (together with annualinterest equal to 7%), or, if the Clal Closing does not occur by 1 June 2014,(1) NIS 100,000,000 will be paid to IDBD by June 2014 and (2) NIS 550,000,000will be paid to the IDB creditors in 3 equal annualinstalments commencing oneyear from Closing (together with annual interest equal to 7%) (the "Alternative2 Post-Closing Payment", and together with the Alternative 2 Closing Payment,the "Alternative 2 Payment"). In the event that the Clal Closing does not occur by 1 June 2014 the totalinvestment by the Consortium will be NIS 1,050,000, based on the samevaluation. Pursuant to this Alternative 2, at Closing, the Consortium members will hold100% of the issued share capital of IDBD. Pursuant to this Alternative 2, the IDB creditors will also be granted IDB'scash reserves (minus certain expenses) and any net amounts which IDB mayreceive as a result of legal proceedings to which it is a party the basis ofwhich predates Closing. Alternative 2 includes a penalty mechanism in case the Consortium fails to paythe Alternative 2 Payment in full, whereby the Consortium will pledge in favourof the IDB creditors IDBD shares equal to 20% of the unpaid amount based on theAlternative 2 Valuation plus all amounts paid into IDBD by the Consortium. Conditions to Closing The Proposed Transaction will be conditional upon, inter alia, the following: a. the approval of the Proposed Transaction by the creditors of IDB; b. the approval of the Proposed Transaction by the Court; c. various regulatory approvals required in connection with the transfer of control of IDB and its subsidiaries, and the implementation of the Proposed Transaction; and d. transfer of the Company's listing category on the Official List from a premium listing (commercial company) to a standard listing (the "Proposed Transfer").The Proposed transfer was approved by the Company's shareholders at an extraordinary general meeting held on 30 October 2013, and it is expected that the Proposed Transfer will become effective on 28 November 2013. Investment structure IDB, the Company, Nochi Dankner, Netz Group, Alon Group and Yitzhak Dankner(together the "Consortium Members") have entered into a set of agreements whichregulate the parties' respective rights and obligations in relation to theProposed Transaction. In order to participate in the Consortium, the Companyand Nochi Dankner have set up a new company ("Newco"), which is indirectlyowned (through a wholly-owned subsidiary of the Company) as to 70% by theCompany and (through a company ("Dankner") controlled by Nochi Dankner as to30% by Dankner. IDB, Newco, Netz Group, Alon Group and Yitzhak Dankner, undertook as follows: a. Newco undertook to invest at least NIS 500,000,000, and in any case the total investment amount invested under Alternative 1 or Alternative 2 minus any amount invested by any other party; b. Alon Group, subject to certain conditions, undertook to invest up to NIS 120,000,000; c. Netz Group undertook to invest NIS 64,600,000 (with an option to increase its amount to 10% of the total investment, an option to match the investment of other investors over 10% of the total investment and an option to be released from said obligation in case of certain material changes to the Proposed Transaction); and d. Yitzhak Dankner has an option to invest up to NIS 148,000,000 and has the right to increase his investment to up to 10% of the total investment amount. An amount equal to NIS 451,000,000 has been put into escrow by the ConsortiumMembers and the remainder of the Alternative 1 Payment or Alternative 2Payment, as applicable, will be funded by the Consortium (including by way ofexternal debt) prior to the dates of actual payment. Additional investors maybe added to the Consortium in the future. At Closing, each Consortium Member will be allocated and issued, pro-rata toits investment, IDB shares and/or non-tradable, non-interest-bearingconvertible bonds, which in aggregate amount to 93.75% of the issued sharecapital of IDB. The agreements entered into between the Consortium Membersinclude penalty mechanisms in case of default to carry out each ConsortiumMember's investment undertaking. In the event that prior to Closing not all outstanding claims against IDB havebeen terminated such that IDB is free and clear of all exposure to such claimsand any future claims the basis of which predates Closing, then, in order toavoid such exposure, Newco and the other Consortium Members will have theoption to invest, at the Company's discretion, in a new special purpose vehicleor directly in IDBD, rather than in IDB, in a manner which reflects thefinancial rationale of the Proposed Transaction. At Closing, the Company will provide Newco with a loan secured on Newco's IDBshares, of an amount equal to NIS 500,000,000. The loan will carry an annualinterest of 4% (to be increased to 6% in case the loan is extended to a further4-year period) and will be repaid within 5 to 9 years. At Closing, the Company will provide Netz Group with a non-interest bearingloan secured on a portion of Netz Group's IDB shares, of an amount equal to NIS9,000,000 which will be repayable over 3 years. In case of a default by NetzGroup to repay the loan, Newco's only recourse will be enforcement of itssecurity over said portion of Netz Group's IDB shares. In addition, the Companywill invest an amount equal to NIS 9,000,000 based on a valuation equal to NetzGroup's own capital. Relationship at Newco level The Company will have the right to appoint the majority of directors to theNewco board of directors. The directors appointed by a shareholder of Newcowill have a number of votes equal to the pro rata holdings of the respectiveappointing shareholder. The Company will have the right to appoint the majorityof directors of the boards of directors of all IDB Group companies. For so long as Dankner holds at least 54% of its initial holding in Newco,which amount to at least 5% of Newco's issued share capital, certain decisionswill be subject to mutual agreement between Newco's shareholders, includingcertain structural changes or the voluntary liquidation of Newco; the approvalof related party transactions by Newco and IDB Group companies; the issuance ofshares, options and convertible securities by Newco; amendments to Newco'sincorporation documents which may materially prejudice Dankner's rights; andthe issuance of securities in IDB or IDBD following which a third party willacquire control of such company. Other than to certain permitted transferees and subject to certain exceptions,the Company and Dankner will not be able to sell Newco shares for a 3 yearperiod following Closing. Following such period, inter alia: a. any transfer of 10% or more of Newco's issued share capital will be subject to the transferee agreeing to be bound by the terms of the investment agreement; b. Newco will have a right of first refusal in relation to any proposed transfer of Dankner's shares in Newco; c. Dankner will have a tag along right; and d. for so long as Dankner holds at least 54% of its initial holding in Newco, which amount to at least 5% of Newco's issued share capital, subject to certain exceptions, Dankner will have a right of first offer in relation to certain proposed sales by Newco of its IDB shares. Dankner will also be granted a put option in relation to its holdings in Newco,to be exercised in several portions within the period commencing four and ahalf years from Closing and ending nine and a half years from Closing. Relationship with the otherConsortium Members The agreements entered into between the Consortium Members, determine, amongothers, as follows: a. subject to any law, the Consortium Members will hold preliminary shareholders meetings and co-ordinate their voting at the IDB shareholders' meetings; b. whereas the Company will have the right to appoint the majority of directors of the boards of directors of all IDB Group companies, the other Consortium Members will have the right to be represented on the boards of directors of all IDB Group companies, subject to certain conditions; c. the Consortium Members will procure that certain changes will be introduced to the incorporation documents of the IDB Group companies to reflect certain understandings between them and will procure that the CEO of IDBD will be a person who is not an interested party of any Consortium Member and is a citizen and resident of Israel; d. other than to certain permitted transferees and subject to certain limited exceptions, the Consortium Members will not be able to sell IDB shares for a 3 year period following Closing, without the prior written consent of Newco. Following such period, Newco will have a right of first refusal in relation to any proposed sale by any of the Consortium Members and the Consortium Members will have a tag along right in relation to any sale of IDB shares by Newco; e. Netz Group and Alon Group will also be granted put options by Newco in relation to their holdings in IDB (including convertible bonds), to be exercised within the period commencing 3 years from Closing and ending 6 years from Closing. Emblaze will guarantee payment in the event of the exercise of said options; f. Newco will have absolute discretion to agree to changes to the Proposal, but the other Consortium Members will have a right to withdraw from the Consortium following a material change, in which case Newco will be responsible for funding any short fall; and g. Any Consortium Member not investing its entire pro rata amount, will indemnify the other Consortium Members, by transferring IDB shares to them, for any penalties the Consortium may incur as a result. Nonetheless, Newco will indemnify the other Consortium Members for any default by Alon Group (and in turn will be entitled to the specific remedies under an investment agreement entered into, inter alia, between Newco and Alon Group, under which Alon Group pledged certain plots of land). Information on Consortium Members Nochi Dankner Nochi Dankner is the Controlling shareholder of Dankner. At present, NochiDankner is the major shareholder and the Chairman of IDB. He also serves as theChairman of the boards of several group companies of IDB, and as a director incertain others. Mr Dankner is the founder and Chairman of Ganden which holds the controllinginterest of IDB. In May 2003, Mr Dankner led a consortium comprised of Gandentogether with the Manor and Livnat families, to acquire the majority interestin IDB. Prior to founding Ganden, Mr Dankner served as a Director and ViceChairman of Bank Hapoalim, the largest bank in Israel at the time. As publicly disclosed by IDB and provided to the Company by Nochi Dankner'slegal counsel, on 27 November 2012, Nochi Dankner was investigated by theIsraeli Securities Authority on suspicion of securities fraud and other relatedoffences allegedly undertaken together with others in relation to an issuanceof shares and warrants by an IDB Group company on 23 February 2012. The IsraeliSecurities Authority completed its investigation and on 23 July 2013 itsubmitted its findings to the Israeli State Attorney. On 9 September 2013, theIsraeli Securities Authority has publicly stated that it believes that theevidence suggests that the suspects, including Mr Dankner, committed thealleged offences. The Israeli State Attorney, which is the state entity vestedwith the power to decide whether to indict Mr Dankner subject to a hearing, hasnot yet published its decision. Nochi Dankner's legal counsel informed theCompany that they have not yet been provided with the evidence underlying theallegations and that Mr Dankner and they intend to vigorously contest suchallegations. Netz Group Netz Group is an Israeli public company traded on TASE. Netz Group is active inthree economic sectors: a. Trade: Netz Group is the controlling shareholder of Mendelson Infrastructures & Industries Ltd ("Mendelson"), an Israeli public company traded on TASE. Mendelson operates in Israel and in the United States in the trading of flows-transportation products, the assembly and maintenance of water pumps, and the production and marketing of polyethylene and PVC pipes sectors. b. US Real Estate: Netz Group is the controlling shareholder of Elad Global Ltd, an Israeli public company traded on TASE, which operates in the residential, revenue-making real estate sector in the United States. c. Tourism: Netz Group is a 50 per cent. joint venture partner of Africa-Israel Investments Ltd, an Israeli public company traded on TASE, which holds several Crown Plaza and Holiday Inn franchises in Israel. Alon Group The Alon Group comprises several private companies which operate in theautomotive industry in Israel. The group employs hundreds of employees and alsohas holdings in the real estate and technology sectors in Israel and abroad. Yitzhak Dankner Yitzhak Dankner is an Israeli businessman. He is Nochi Dankner's father. Information on IDB IDB is one of Israel's largest holding companies which, through IDBD, holds amixture of majority and minority shareholdings in companies that are engaged invarious sectors of the Israeli economy and overseas. It is an Israeli residentincorporated in Israel. The securities of IDB are listed on TASE. Selected financial information on IDB The information set out below has been extracted without adjustment from: (i)the consolidated audited annual accounts of IDB Group for the years ending 31December 2010, 31 December 2011 and 31 December 2012 and (ii) consolidated theunaudited interim results for the IDB Group for the six months ending 30 June2013. Year ended 31 December Half year ended 2010 2011 2012 30 June 2013 (NIS, millions) (NIS, millions) (NIS, millions) (NIS, millions) Current assets 30,733 26,521 21,629 22,260 Total assets 136,622 132,723 124,577 126,869 Non-current 104,820 109,298 105,399 106,216liabilities Current 21,988 17,242 16,195 16,955liabilities Equity/deficit 811 (1,106) (1,835) (1,961)attributed totheshareholders ofIDB Year ended 31 December Half year ended 2010 2011 2012 30 June 2013 (NIS, millions) (NIS, millions) (NIS, millions) (NIS, millions) Revenues 41,070 37,632 40,924 19,433 Expenses 38,703 40,582 41,372 18,676 Profit (loss) 2,367 (2,950) (415) 757before taxes onincome (1,138) (840) (585) (327) Taxes on income Profit from 643 407 292 -discontinuedoperation netof tax Net profit 1,872 (3,383) (708) 430(loss for theyear) Net profit(loss) forthe yearattributable 91 (2,718) (947) 22to: The ownersof IDB Non-controlling 1,781 (665) 239 408interests 1,872 (3,383) (708) 430 According to a submission made by the board of directors of IDB to the Court inthe proceedings in accordance with Section 350 of the Israeli Companies Law,details of which are summarised below, the significant events which have led tothe deterioration in the business and financial position of IDB since the firsthalf of 2012 derived from a combination of macro-economic circumstances,regulatory changes and unforeseen events, which have together materially andadversely affected the business of the main operating IDB Group companies. Suchcircumstances include: (i) regulatory changes in the telecommunications andinsurance sectors which affected the market capitalisation of Cellcom and Clal;(ii) the effects of an anti-capitalist social protest which affected Israel inthe summer of 2011 and adversely affected Shufersal; (iii) recommendations madeby a government appointed committee in September 2011 concerning a proposedliberalisation of the cement market in Israel which adversely affected NesherIsrael Cement Enterprises Ltd (IDB no longer has holdings in that company);(iv) several unsuccessful transactions, in particular investments in US realestate; (v) unforeseen regulatory and legislative changes in connection withthe implementation of IFRS 9 have influenced the calculation of profits by IDBGroup companies and adversely affected their ability to pay dividends (due tothe fact that losses attributed to the investment in Credit Suisse could not berecognised for certain purposes); (vi) investments made by IDB Group companiesin oil and gas explorations have not yet produced revenues and therefore IDBrecognised a decrease in the value of such holdings. IDB has been undertakingactions in order to improve its liquidity. Holdings of IDBD IDBD operates primarily in the following sectors: a. Communications: IDBD holds, through a subsidiary holding company, approximately 42 per cent. of the issued share capital (and approximately 45.3% of the voting rights) in Cellcom Israel Ltd, one of Israel's leading providers of a range of communications services focusing primarily on providing cellular communications services; b. Financials: IDBD currently holds approximately 55 per cent. of the issued share capital of Clal, one of Israel's largest insurance groups. Clal's focus is on the following areas: * long term insurance; * general insurance; * health insurance; and * financial services. As part of its operation in the financial services sector, IBDB also holds c.2per cent. of the shares of Credit Suisse (although IDBD does not hold controlor management rights in Credit Suisse and does not appoint board members); c. Technology: IDBD holds, through a subsidiary holding company, approximately 15.2 per cent. of the issued share capital of Given Imaging Ltd., a company which develops, manufactures and markets innovative diagnostic products for the visualisation and detection of disorders of the gastrointestinal tract. In addition, IDBD holds, through a subsidiary holding company, approximately 50.3 per cent. of Elron Electronic Industries Ltd., an Israeli holding company dedicated to building technology companies, primarily in the field of medical devices; d. Real Estate: IDBD holds, through a subsidiary holding company, approximately 76.45 per cent. of the issued share capital of Property and Building Corporation Ltd., a company specialising in the fields of both revenue-generating properties and residential construction in high demand areas (both in Israel and abroad); e. Industry and Energy: IDBD holds, through subsidiary holding companies, 40 per cent. of the issued share capital of Makhteshim Agan Industries Ltd. (" Makhteshim"), a company which specialises in the chemicals industry and focuses mainly in the area of agrochemistry (dealing in crop-protection products). The other 60 per cent. of Makhteshim shares are held by China National Agrochemical Corporation, a subsidiary of China National Chemical Corporation ("Chemchina"). In accordance with a shareholders' agreement between Chemchina and Koor Industries Ltd ("Koor") (the holding company through which IDBD holds its share at Makhteshim), as long as Chemchina holds 50 per cent. of Makhteshim shares it can nominate at least two more directors to the board of Makhteshim than Koor can nominate; and f. Retail: IDBD holds, through a subsidiary holding company, approximately 47.16 per cent. of the issued share capital (and approximately 49.5% of the voting rights) in Shufersal Ltd., one of the largest retail food chains in Israel. Commercial rationale for the Proposed Transaction IDB is one of Israel's largest and diverse holding companies. IDB ownssignificant interests in undertakings with leading market positions in theIsraeli industry, retail and services (through the largest retail company inIsrael), insurance (through the second largest insurance company in Israel),telecommunications (through the largest cellular company in Israel), technologyand real estate sectors (through one of the leading real estate company inIsrael), as well as holdings in the financial services and real estate sectorsoutside Israel. Most of the major companies held by IDB are traded on TASE orNASDAQ. In April 2013 a bondholder of IDB initiated a liquidation application againstit owing to a going concern note in IDB's 2012 annual report and accounts. InJune 2013, the trustees of the IDB bondholders applied to the Court for acompromise arrangement in accordance with Section 350 of the Israel CompaniesLaw, 1999 (Compromise or Arrangement). The IDB creditors are predominantlyinstitutional investors, private investors and banks and IDB's debt comprisesbank loans and several classes of bonds. On 9 June 2013, the court made adecision in which it ordered proposals for a creditors' arrangement to be filedand examined by a Court-appointed expert. Several Proposals were filed andexamined, including an outline for a scheme of arrangement submitted by IDB on7 July 2013. The Proposed Transaction is intended to be carried out as part ofthe potential implementation of such outline scheme of arrangement. The trustees of the bondholders of IDB reported that they had entered into anagreement with a corporation controlled by Eduardo Elstein regarding aninvestment in IDBD as part of an outline scheme of arrangement proposed bythem. On 26 August 2013, the Court set 20 October 2013 as the extended deadline forparties to submit proposals. On 17 October 2013, the Court extended thetimetable for submission of proposals to 3 November 2013. The Board considers the acquisition of a controlling interest in IDB (throughthe Court process) represents an attractive and opportunity to acquire controlof the assets of IDB at a significant discount to the aggregate cost ofacquiring such assets individually. The Company's Proposal is aligned with the intentions of the Company'smanagement which are aimed at maximizing value to the Company's shareholders. The Board believes that there are certain efficiencies and cost cuttingmeasures within the management and operations of IDB which, once implemented,will deliver increased revenues for IDB and consequently the Company. The Board considers that the Proposed Transaction, and the exposure to the IDBGroup, will enable the Company to pursue significant business opportunities. Expected timetable The following timetable sets out the expected dates for implementation of theProposed Transaction (some of which are indicative only): Time and/or date Date on which Court appointed expert finalises No later than 12 November 2013his review of the proposal(s) in relation to IDBand makes his recommendations General meeting of IDB creditors to vote on the No later than 24 November 2013proposal(s) in relation to IDB Date upon which the transfer of listing category 28 November 2013will become effective Date of sanction by the Court of the proposal 5 December 2013approved by the IDB creditors in relation to IDB Expected date of completion of the Proposed Q1 2014Transaction if sanctioned by the Court The Company will continue to notify shareholders of any updates with regard tothe Proposed Transaction and/or any material changes to the terms of itsProposal by issuing further announcements via PRN, a Regulatory InformationService. All such announcements may also be viewed at the same time on theCompany's website at www.emblaze.com. In the event the Consortium's Proposal issuccessful, the Company will prepare the appropriate documentation providingmore details on the Company, as enlarged by the IDB Group, and the Company'sinvestment in IDB. Enquiries: Hagit Gal, Emblaze hagit.gal@emblaze.com The Emblaze Group is traded on the London Stock Exchange (LSE: BLZ) since 1996.www.emblaze.com. Appendix Alon Group Alon Musachei Rechev (1992) Ltd, a company incorporated in Israel (registered number 51-171965-0) Board the board of directors of the Company Company or Emblaze Emblaze Ltd, a public limited company incorporated in Israel (registered number 52-004292-0) Court the District Court of Tel Aviv, Israel Group Emblaze and its subsidiary undertakings IDB IDB Holdings Corporation Ltd, a company registered in Israel (no 52-002828-3) IDBD IDBD Development Corporation Ltd, a company registered in Israel (no 520032285) and a wholly owned subsidiary of IDB IDB Group IBD and its subsidiary undertakings London Stock Exchange London Stock Exchange plc Netz Group Netz Group Limited, a company registered in Israel (no 52-003938-9) NIS New Israeli Shekel Official List the official list of the FCA Regulatory Information Service one of the regulatory information services authorised by the Financial Conduct Authority to receive, process and disseminate regulatory information from listed companies TASE means the Tel Aviv Stock Exchange