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Now that they've toasted the first stage of their reorganization, in which the

Ellern (TASE:

) group is taking over three other Dankner family companies, new facts are coming to light in the shareholders vote of Monday.

The assembly of shareholders agreed that Ellern would acquire the controlling interests in

Israel Salt Industries (TASE:



Dor Chemicals (TASE:


) and

Dankner Investment (TASE:


) for $122.7 million.

It turns out that one Amit Berger, who serves as a director for Ellern Holdings, and also as chairman of the Dor-Berger Portfolio Management company, is the man who pulled the Dankner family's chestnuts from the fire.

Dor-Berger generally keeps its holdings in publicly traded companies a hair below the 5% threshold at which it has to report its dealings to the authorities. It holds a 4.99% interest in Ellern.

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In the vote this week, Dor-Berger's representative Amit Berger was the only director to vote with the Dankners for the Ellern reorganization. The other directors representing the public opposed it, claiming that the deal transforms a stolid, solid company into a very, very highly leveraged one.

In any case, Ellern's announcement to the authorities reveals that shareholders holding 528,000 shares, or 87% of the company's equity, showed up for the shareholders assembly.

The holders of 517,000 shares, or 98% of the participating shareholders, supported the reorganization, while the holders of 10,500 shares 1.99% of the company's share capital opposed it.

The Ellern deal is essentially one with its controlling shareholders, the Dankners. Therefore, the Companies Law stipulates that approval is contingent on obtaining support from at least a third of the shareholders who are not interested parties in the deal.

All the opponents were individual and institutional shareholders without interest in the deal, according to the company's notice. Dor-Berger, which has no part in the deal either, holds 29,564 shares - exactly the amount required to meet the letter of the law. The question is whether Amit Berger is really a disinterested party, however, given his directorship at Ellern Holdings.

The answer is one of interpretation. Berger's status is not clear-cut. Most lawyers with whom TheMarker talked lean toward a lenient interpretation, saying that scrutiny should be directed toward Berger's personal interest if he has one.

A personal interest could theoretically include promises of future business, voting agreements, perks, and so forth. Berger himself explicitly told TheMarker, that "there are no agreements or promises of any kind between us and the Dankner family. None in the past and none expected in the future".

So why did Dor-Berger support the Dankner reorganization when everyone else balked? "It's an amazing deal," Berger said, simply. By the way, Berger has authority from Dor-Berger to decide how to handle, at his sole discretion, regarding the company's proprietary portfolio.

That's some coincidence

But matters at Dor-Berger in the months preceding the Ellern deal raise questions.

As said, Dor-Berger holds 4.99% of Ellern's equity, or, 29,564 shares.

But according to the company's second-quarter statement, Dor-Berger's stake in Ellern stood at 15,356 shares, or 2.5% of the company's equity. Whence that extra 2.499%?

The answer lies in an announcement to the Tel Aviv Stock Exchange dating from July 4, 2002. The notice describes two off-floor transactions in shares of Elgar - Ellern's former name. The two selling companies were Danran Hachzakot, owned by Avraham, Danny, Gadi and Alon Dankner, and Shamdar Holdings, owned by Shmuel and Dori Dankner.

Danran and Shamdar each sold 7,104 shares, totaling 14,208 shares. The buyer was not named in the notice to the TASE.

But a quick calculation on a napkin shows that 14,208 plus 15,356 equals hold your hats 29,564 shares. Eggzactly what Dor-Berger held on the day of the vote.

Amit Berger confirmed to TheMarker on Monday that Dor-Berger is the one that purchased the shares from the Dankners in those two off-floor transactions. It paid NIS 100 per share, whereas the shares were trading at NIS 65 that day. Meaning, Dor-Berger paid a premium of 54%.

The timing of the deal is intriguing, since it was carried out in early July this year, a mere few days before Ellern officially announced its reorganization plan involving Salt Industries, which holds an 11.6% stake in Israel's biggest bank, Hapoalim.

Shifts of that magnitude are not sewn up on a whim, mere days before the announcement to the authorities. It is reasonable to assume that Berger knew of Ellern's and the Dankners' intentions when buying the Ellern shares from the Dankner companies.

Great expectations

Asked on the timing of Dor-Berger's acquisitions, Berger said Dor-Berger had decided to reach a 5% holding when first buying into the company in 2001.

Yet why now, and why did it pay so much? Why not simply pick up the shares on the market, for half the price?

It should be noted that if Dor-Berger had not increased its stake, that would not have changed the results of the vote this week. It had previously held enough to pass the threshold and serve as a third of the disinterested shareholders.

Since the opponents held 10,537 shares, and Dor-Berger held 15,356 the Dankners would have been backed by a majority of 59% of the disinterested shares. With the new shares, that majority merely climbed to 77%.

Also, if all Ellern's shareholders had shown up, and assuming that all would have opposed the deal except for the Dankners and Berger then Dor-Berger's holding would not have sufficed to get the reorganization approved.

In fact, the shares Dor-Berger held on the day of the vote assured the Dankners of the assembly's approval, even if 84% of Ellern's public shareholders had turned up for the vote, and all shouted nay.

In practice, shareholders from the public including institutionals voted with their feet. Only 38% of them showed up. We may assume that in any case, the Israel Securities Authority is going to have another look at the results.