Phoenix backs off selling Arieli's pledged Elron shares after debt deal
Arieli Group, which took on debt to buy control of Elron in 2024, had fallen out of compliance with its loan terms as Elron's stock slid, pushing lender Phoenix Investment House toward selling off Arieli's pledged control stake.
A solution is emerging to the issue of the loan that Arieli Group took from Phoenix Investment House to acquire control of the technology investment company Elron.
Elron announced yesterday that its controlling shareholder informed it that it has reached an arrangement settling its debts to the lender, secured by a pledge on the company's shares held by Arieli Group. Arieli Group holds 58.4% of Elron's shares, which rose 1.25% on the stock exchange yesterday and are trading at a valuation of 205 million shekels. To acquire control of Elron, carried out for 53 million dollars in September 2024, Arieli took on debt of 90 million shekels. For the loan, Arieli pledged its controlling shares in Elron.
The value of the shares at the time was double the value of the loan. The loan terms set covenants that Arieli was required to meet. As long as Elron traded at a value close to the value at which it was acquired, there was no problem, but then Elron began losing value. Thus, since the start of the year the company's stock has fallen 32%. This, even though since the start of August it has recovered from a deeper low and risen 27%.
This past Sunday, Calcalist revealed that Arieli Group is not meeting the terms of the loan it took from Phoenix Investment House (formerly Excellence) to acquire control, and that Phoenix is offering for sale to market parties the controlling shares in Elron pledged to it under the loan.
Phoenix Investment House approached Arieli and demanded it either repay the loan, or inject capital that would lower Elron's debt-to-equity ratio to a level meeting the loan terms. Over the past two months, contacts have been underway between Phoenix and Arieli, during which Arieli repeatedly promised it was about to refinance the loan, but this did not happen.
Elron did not detail the arrangement Arieli Group reached with Phoenix, but apparently it involves parties lending Arieli a sum equal to about 20% of the shares' value, which Arieli would then channel to Phoenix Investment House to lower the company's debt-to-balance-sheet ratio. Arieli is examining an additional alternative solution, more favorable to it, so the deal is not closed. In any case, exposure of the conflict helped Phoenix obtain a quick solution from Arieli, which had delayed the solution for close to two months.
Arieli is a private company, incorporated in Israel, ownership of which is divided between Lisya Bahar Manoah - who serves as Chairwoman of Elron in an 80% position with a monthly salary of 104,000 shekels - and Eric Bentov and Evan Renov, who each hold about 33%.
Elron, managed by Yaniv Schneider, holds stakes of varying sizes in 17 technology companies, one of them through the company RDC, in which it holds a partnership with the state-owned Rafael in equal parts.
Among the companies it is invested in: Adionics, which develops technology for improving electric battery performance (2.62% of Elron's holding); OpenLegacy, which develops a technology platform enabling organizations to connect and modernize old, cumbersome core systems to the cloud and to advanced digital services (22.2%), in which it invested 8.2 million dollars through RDC, jointly held with Rafael; Axonius; BrainsGate (in which it invested 30 million dollars); Wonder Robotics; and others. Elron is a veteran company, 60 years old, and Arieli Group, a third-generation American family fund, began immediately after the acquisition with a comprehensive transformation that turned the company from a passive investor into an active partner.
