El Al Israel Airlines Ltd. said late last week it had reached an understanding with the First Israel Mezzanine Investors Fund (FIMI), for an investment of as much as US$60 million in Israel's flag carrier El Al Israel Airlines.
Once negotiation successful the First Israel Mezzanine Investors Fund (FIMI), is Israel
's largest private investment fund, will join the controlling core of the airline.El Al is controlled by the Borovich family
's Knafaim Holdings with a 39.33% stake.FIMI said it seeks to inject up to US$60 million into the airline, which posted a 79% rise in profit in the third quarter but has struggled in recent years due to high fuel costs
.Fimi
’s investment into the airline comes as the carrier’s shares trade near a record low as higher global oil prices increased operating costs and competition intensified as discount European carriers entered the local market. The company is also struggling to boost profitability, posting losses in three out of the last four years.In the first stage, FIMI would initially buy 5.7% of El Al
's shares with an investment of US$5 million. It will buy about 30 million shares at 0.625 shekel (USD$0.17) each. FIMI also seeks to pay another US$5 million for shares owned by Knafaim that would raise its stake in the airline to 11.41%.In a second stage, no later than August 30, FIMI would invest US$30 million in exchange for an allocation of 180 million additional shares that would boost its stake in the company to 25.5%
.
The investment is subject to FIMI obtaining a control permit for El Al from the government
. The last stage is also conditioned upon the airline reaching a collective bargaining agreement with the airline's 6,100 employees.
FIMI also could exercise options for another 12.3% at a total cost of US$20 million in 2014 and 2016
.
