Activist hedge fund firm Elliott Management, led by billionaire Paul Singer, has bought 4.8% of Bezeq shares for NIS 700 million ($205 million). In addition, the fund sent a letter to the temporary deputy chairman of the board of directors of Bezeq, David Granot, in which it described the current problems that prevent Bezeq from realizing its potential.
Elliott Management noted that Bezeq is held by a three-tier leverage pyramid, which creates many conflicts of interest and negative incentives to manage the company and called for removing at least one layer of the leveraged pyramid in order to create a greater identity between Bezeq’s corporate governance and economic ownership.
The Fund also points to the urgent need to address the serious problems in the company’s corporate governance and calls for changes to the board of directors, including the immediate resignation of all directors under the Securities Authority’s investigation and/or related to Eurocom. The activist investor believes that Bezeq will benefit significantly if new independent directors and professional directors are elected to the board so that it has “the right mix of expertise, independence, and integrity for the future.”
“The fund believes that significant value can be gained if the right steps are taken to improve corporate governance,” the fund added, “Bezeq has solid business fundamentals, exemplary manpower, and great potential, which makes us proud to be one of the largest independent investors in the company. We are eager to work with you to ensure that the company has the structure of the board of directors and the commitment to good governance to which it is worthy. ”
In June last year, the fund announced that it had acquired 9.8% of the Israeli information security company Imperva. In the estimation of the fund, the company’s share was traded at a significant discount to its fair value, which does not reflect the potential for continued growth and improved profitability.
Over the past few years, the Elliott Management has initiated a number of activist initiatives to inflate value in companies that were traded at a low price. These companies include EMC sold to Dell, Informatica and BMC sold to a private equity fund, and Citrix, Juniper, Brocade. In most cases, the fund’s investment in these shares led to a value increase of more than 25%. [Calcalist]