El Al Israel Airlines Ltd. (ELAL) advanced the most in a decade after the country’s flagship carrier said Fimi Opportunity Funds is in talks to pay a premium of as much as 36 percent for a stake.
The shares of the Lod, Israel-based carrier, first listed on the Tel-Aviv Stock Exchange in 2003, advanced 21 percent to 0.552 shekel at the close in Tel Aviv, bringing the company’s market value to 274 million shekels ($75 million). The TA-25 benchmark index advanced 1.5 percent, the most in a month.
Tel Aviv-based Fimi, a private equity fund which has investments in Gilat Satellite Networks Ltd. (GILT) and Ormat Industries Ltd. (ORMT), has signed a term-sheet for the investment of as much as $60 million for as much as a 42 percent stake in the airline, according to a bourse filing on Jan. 31 after markets closed. Part of the stake will be bought from controlling shareholder Knafaim Holdings Ltd. (KNFM) The investment would be made in several stages, with the second one conditional on the renegotiation of El Al employee contracts, the filing said. Fimi would pay a price of 0.625 shekel a share, a 36 percent premium to the company’s closing price of 0.458 shekel on Jan. 31.
“Fimi could implement efficiency measures helping the company cut costs,” Guy Cordovi, head of international trading at Ramat Gan, Israel-based Excellence Nessuah Brokerage Ltd., said today by phone. “The airline is known for its strong labor unions and for its low worker output.”
Fimi’s investment comes as the carrier’s shares sunk to a record low last year as higher global oil prices increased operating costs and competition intensified as discount European carriers such as EasyJet Plc. expanded in the local market. The company is also struggling to boost profitability, posting losses in three out of the last four years.
Global air passenger traffic last year grew 5.3 percent, lower than 2011’s 5.9 percent figure, the International Air Transport Association said Jan. 31. Negative factors weighing on earnings include high fuel costs and sluggish economic growth projected at 2.3 percent, it said.
Israel is in talks with the European Union over the signing of an “open skies agreement” that will allow carriers to fly to more destinations. El Al said in July this agreement may negatively affect the company. In February last year the Histadrut labor federation declared a work dispute over the government’s open skies policy. El Al said in December it lost as much as $17 million in sales due to an eight-day military operation in the Gaza Strip the previous month.
Knafaim, which has a 39.33 percent stake in El Al fell 2.8 percent to 9.813 shekels.
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