Arkia employees offered just 3% stake in rival takeover bid, with Sabbath flights to end
New York-based ultra-Orthodox entrepreneur Ezra Ungar is seeking control of the airline in a proposal that would sharply dilute the employees’ current 22% holding. In return, they would receive a board seat and protections against layoffs, while the airline would stop operating on Shabbat.
Ezra Ungar, an ultra-Orthodox entrepreneur from New York, is proposing that Arkia employees retain only a small, single-digit percentage of the company as part of a deal to acquire a controlling stake in the airline. Calcalist has learned that a proposal submitted on Friday to representatives of the Arkia Aviation and Tourism Employees Corporation, which holds a 22% stake in the airline, includes employee representation on the board of directors through one seat, as well as protections against layoffs and workforce reductions as part of an efficiency drive.
However, a key condition set by Ungar is that the airline cease operating flights on the Sabbath. The employees, led by Avi Edri, chairman of the Transport Workers Union in Israel, have yet to respond to the proposal. If they fail to secure a more favorable offer, however, they may be forced to compromise. Ungar appears to be proposing that the employees retain a 3% stake in the company.
The prospective buyers of Arkia, Yariv Lerner, Kidan Dahari, Yaron Adiv and Einav Adiv-Barar, have given the employees until Monday to submit an alternative offer under the same acquisition terms. They have pledged to step aside in the employees’ favor if they manage to secure a better proposal. Ungar has already conducted due diligence on the company. About four months ago, he submitted a significantly more generous offer that would have allowed employees to retain their full 22% stake. Since then, however, Arkia’s financial position has deteriorated, and the airline now requires an immediate capital injection to continue operating as a going concern.
Meanwhile, it was reported in September that Ungar had told authorities in New York that he lacked the funds to pay a $500,000 fine. In a sworn affidavit, he declared that he owned no real estate and lacked sufficient assets, cash or access to credit to cover the payment. Furthermore, reports suggest that his role in the Arkia deal differs from how it was initially presented. A source familiar with the details told the American real estate publication The Real Deal that Ungar is not investing his own money in the transaction but is instead acting as an intermediary for other investors from the ultra-Orthodox community. Associates of Ungar, however, have said that financing for the deal has already been secured.
Under the agreement signed with the four prospective buyers, they are to inject $30 million into Arkia. The Nakash brothers are to contribute an additional $8.5 million and waive a $4.5 million debt, while the state is expected to provide another $7.8 million. Ungar’s proposal also involves a $30 million capital injection, and he is apparently seeking to bring additional partners into the deal. Meanwhile, the employees are holding talks with other interested parties, although Ungar has an advantage in having already completed due diligence on the airline.
