BGI's (88.9) (BGI) reports for the second quarter of 2014 provide for the first time confirmation of the difficulties of the company's controlling shareholder, Ukrainian millionaire Alexander Granovsky, in transferring a payment of approximately $11 million to the Fortissimo Fund, Naftali Shani and other sellers, as part of the completion of the deal to acquire control of Emblaze (now known as "BSD Crown").
Although Granovsky was previously presented as a millionaire with many means, in reality it is very difficult to trace his current financial situation, since most of his businesses are private and concentrated in Ukraine, a country that until recently experienced a political-military crisis with Russia, which has had an impact on its economic situation, and apparently makes it difficult for Granovsky to liquidate his money.
In the reports, BGI reports that Granovsky, through the private company Israel 18 (formerly Chabad 770), only partially transferred the payment for the third and final tranche, as part of an investment totaling approximately $60 million in controlling shares in Emblaze, through which he had already managed to purchase (at great expense) the food company Willifood.
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As part of the third phase of the investment, Israel 18 paid only about $20 million, out of about $31 million that Granovsky was required to transfer to the Emblaze sellers (not including fines for payment delays).
BGI notes that, as informed to it by Israel 18, the parties to the transaction reached understandings regarding the deadline for realizing the payment obligation, "due to the situation in Ukraine, the place of residence of the controlling shareholder (i.e. Granovsky, A. L.). According to those understandings, "the controlling shareholder will be given the time he needs to organize the payment, and this without setting a specific time for this.".
The cash-rich acquisition of Emblaze was divided into several stages: the first stage included the purchase of approximately 20% of the shares through the public BGI for $26 million, the second stage was a tender offer for the shares held by the public (5%) for approximately $7 million, and in the third stage, the parties were given mutual options to increase Granovsky's share, through Israel 18 (the company through which he holds BGI). BGI notes that it holds approximately 44% of the voting rights in Emblaze.
About a year ago, Granovsky signed a deal through BGI to acquire Emblaze, which is traded in London, with the aim of harnessing its cash to acquire control of IDB (alongside Nochi Dankner), a deal that ultimately did not go through.
Granovsky later used Amblaze's cash to purchase control of the food importer Willifood from the Villiger brothers for NIS 285 million - a deal on which he currently loses about 50% "on paper" relative to the market price. After the purchase, Amblaze had about $56 million (NIS 190 million) left in its coffers.
Willifood's reports for the first half of 2014 indicated a deterioration in its situation, with a 531% drop in net profit for the half, which amounted to NIS 10 million. Its revenue for the half fell by a moderate rate of less than NIS 113 million to NIS 175 million.
The continued negative trend in the Willifood business is reflected in a double-digit decline in sales in July, which is expected to be reflected in the third quarter reports.
Yossi Villiger, the company's chairman and former controlling shareholder, attributed much of the trend in July to Operation Protective Edge.
Yesterday, BGI called a shareholders' meeting for next month, which will be asked to approve a monthly compensation of 60,000 shekels for the company's CEO, Yosef Israel Schneerson (who holds approximately 51% of Israel 18 shares), subject to approval by the shareholders of the subsidiary Emblaze (BSD, as mentioned), which will mainly bear the cost.
BGI stated that "the security check was given by Rabbi Wolf for the Dutch holding company as collateral for completing the Emblaze transaction. With the sellers' consent, the final payment, which was to be paid these days, was postponed.".
