Tel-Aviv Stock Exchange Executes Share Buyback from Manikay Fund

In a notable transaction announced on January 10, 2025, the Tel-Aviv Stock Exchange Ltd. (TASE) reported the execution of a buyback agreement with Manikay Global Opportunities Holdings 1, LLC, commonly referred to as the Manikay Fund. This strategic deal involved the repurchase of 4,622,028 ordinary shares, amounting to approximately 4.82% of TASE's total issued share capital, at a price of 43.79 NIS per share. The total expenditure for this buyback reached 202.4 million NIS.

Background on the Transaction

The Manikay Fund, which has been the largest shareholder since August 2018, previously held around 19.29% of TASE's issued share capital before the buyback. This decision comes as part of a larger strategy to allow for various equity holders to manage their stakes more effectively, while also providing the Manikay Fund with the opportunity to streamline its holdings without significant market disruptions.

Following the buyback, Manikay Fund’s shareholding will adjust to approximately 15.2%, while other equity holders are expected to see a proportional increase in their stake, averaging an increase of about 5.07%. This change signifies a shift in the dynamics of equity distribution among TASE's stakeholders.

Financing the Buyback

Interestingly, TASE has opted to fund this buyback primarily through its own reserves, augmented by a new bank loan of 130 million NIS. This strategic move allows TASE to maintain operational flexibility and avoid liquidating investment portfolios unnecessarily. The new loan carries a favorable interest rate, lower than the previous obligations, while ensuring that TASE's financial health remains intact.

Approval Process

Given the complexity of share buybacks under the Companies Law, the transaction underwent rigorous scrutiny. An audit committee and the board of directors thoroughly evaluated the buyback to ensure it met profit and solvency guidelines. Particularly, the involvement of Mr. Salah Saabneh, a director of TASE with ties to Manikay, necessitated extra layers of approval to uphold corporate governance standards and avoid conflicts of interest.

A professional opinion from an experienced Israeli investment house supported the transaction, indicating that the pricing reflected the market average over a previous trading period, thereby lending credibility to TASE's approach to share repurchase.

Financial and Strategic Implications

The buyback transaction emerges against the backdrop of significant corporate planning. With profits available for distribution estimated at approximately 324.5 million NIS as of September 30, 2024, TASE’s decision to execute this buyback showcases a commitment to optimizing shareholder value strategically, especially in light of prevailing market conditions.

Further, the move aligns with TASE’s five-year strategic plan (2023-2027), which outlines initiatives for growth and sustainability in a competitive capital market. By reducing the quantity of shares outstanding, the buyback could enhance key financial metrics, such as return on equity and the leveraging ratio, which are critical for attracting ongoing investor interest.

Conclusion

The Tel-Aviv Stock Exchange's share buyback from the Manikay Fund marks a significant event in its financial strategy, emphasizing the importance of shareholder value optimization. The careful planning and execution surrounding this transaction underscore TASE's commitment to maintaining a robust capital structure while navigating the dynamics of corporate finance. As the TASE continues to adapt to market demands, actions such as these will play a pivotal role in shaping its future.