LONDON, January 16, 2018 /PRNewswire/ --
Reveals economic
stake of 4.8% in Bezeq
Highlights need to simplify
multi-layered pyramid structure
Calls for immediate
removal of directors under
investigation
Elliott Advisors (UK) Limited ("Elliott"), which advises funds
which collectively hold an economic interest in Bezeq The Israeli
Telecommunication Corporation Ltd. ("Bezeq" or the "Company") of
approximately 4.8%, today released a letter to Bezeq's Interim
Board Chairman Mr. David Granot.
Elliott describes the current problems that undermine Bezeq's
potential, including the Company being part of a three layer
leveraged holding pyramid with multiple conflicts and misaligned
incentives. Elliott calls for the removal of at least one layer of
the leveraged pyramid to more closely align the governance of Bezeq
with its economic ownership.
Elliott furthermore outlines the urgent need to address the
Company's serious corporate governance issues, and calls for
changes at the Board level, including the immediate resignation of
all the directors who were implicated in Israel Securities Authority investigations,
and/or affiliated with Eurocom. Elliott believes Bezeq would
benefit considerably from the election of new independent and
professional directors to the Board, equipping it with "the right
mixture of expertise, independence and integrity for the
future."
As articulated in its letter to Interim Chairman Granot, Elliott
"believe there is significant value to be unlocked if the right
steps are taken to improve its corporate governance." Elliott goes
on to state, "Bezeq has strong business fundamentals, an exemplary
workforce, and great potential, which is why we're proudly one of
the Company's largest independent investors. We are eager to work
with you to ensure this Company has the board composition-and
commitment to proper governance-that it deserves."
The text of the letter can be read in full below.
About Elliott
Founded in 1977, Elliott Management Corporation is one of the
oldest private investment firms of its kind under continuous
management. The firm's investors include pension funds,
private endowments, charitable foundations, family offices, and
employees of the firm. Elliott Advisors (UK) Limited is
an affiliate of Elliott Management Corporation.
January 16,
2018
Via Email
David Granot
Interim Chairman
Bezeq The Israel Telecommunication Corporation Ltd.
The Triangular Tower
3 Azrieli Center
Tel Aviv 61620, Israel
Attention: David Granot, Interim
Chairman of the Board of Directors
Dear Mr Granot,
Elliott Advisors (UK) Limited (together with funds advised by
it, "Elliott" or "we") has been a shareholder of Bezeq The Israel
Telecommunication Corporation Ltd. ("Bezeq" or the "Company") since
mid-2017 and currently has an economic interest of 4.8% in the
Company.
We have invested considerable time and effort to
researching and analysing Bezeq, and believe there is significant
value to be unlocked if the right steps are taken to improve the
Company's corporate governance. Bezeq has strong business
fundamentals, an exemplary workforce, and great potential, which is
why we're proudly one of the Company's largest independent
investors. We are eager to work with you to ensure this Company has
the board composition-and commitment to proper governance-that it
deserves.
Over the past few weeks we have closely monitored the highly
public discussions regarding legal actions taken by creditors
against Eurocom Communications ("Eurocom") and the potential
recapitalisation and change of control of that entity. Eurocom sits
at the top of a three layer leveraged holding pyramid that at
present enables it to effectively control Bezeq despite being in
default. We believe that this ownership structure needs to be
simplified, with at least one layer being removed, to more closely
align the governance of Bezeq with its economic ownership. We also
believe that this should be achieved in a professional and
transparent manner, making sure that a new control permit, if any,
will be issued only to a well-capitalised professional investor or
consortium with relevant expertise in telecom investments and
committed to the highest standards of corporate governance.
Moreover we believe that the Board of Bezeq, as currently
composed, is no longer fit for purpose. A number of the Directors
are subject both to investigations of serious financial misconduct
at Bezeq and / or are affiliated with Eurocom, which is subject to
legal actions by its creditors. In these circumstances stakeholders
of Bezeq may doubt both the independence of these Directors and
their ability to focus properly on their obligations as Board
members. We believe that it is in the best interests of Bezeq and
all its stakeholders, including independent shareholders who own
73.7% of the shares, for decisive and immediate action to be taken
to strengthen the Company's corporate governance.
In our view, the key steps in this direction include the
following:
- All of Bezeq's Directors implicated by the Israel Securities
Authority investigation and/or affiliated with Eurocom should
announce their resignations, effective immediately, from Bezeq and
all its subsidiaries;
- Such Directors should be replaced with independent and
professional Directors elected from of a slate of candidates
proposed by an independent special committee of the Board,
following consultation with Bezeq's key shareholders, and confirmed
by shareholder vote at the earliest opportunity; and
- In the event of any change in the ultimate controlling
shareholder of Bezeq, the Directors nominated by the new
controlling shareholder should be chosen according to their
relevant experience in businesses at this scale, and their clean,
established record. Prior to their nomination the identity of such
new Directors should be consulted upon with other key shareholders
of Bezeq and confirmed by the relevant shareholder meeting.
As you well know, Bezeq faces compelling business opportunities
and significant challenges. The time that passes without stable,
impartial ownership and governance is to the detriment of all
stakeholders. As such, we urge you to support the type of corporate
governance which Bezeq and its stakeholders deserve - a Board with
the right mixture of expertise, independence and integrity for the
future.
We sincerely hope that our concerns will be promptly addressed
over the coming weeks. In the meantime, we stand ready to take any
and all steps open to Bezeq shareholders to ensure our interests
are protected and welcome any questions you or any members of the
Board may have.
We would like to discuss the letter in person with you at your
earliest convenience.
Yours sincerely,
Elliott Advisors (UK) Limited