Civil Case (Tel Aviv) 58147-09-19 Alon Blue Square Israel Ltd. v. Israel Credit Cards Ltd.

Judgment

The plaintiffs together sold to the defendant their shares in an asset-intensive company in which the parties held jointly.  The agreement conditions the plaintiffs' right to receive additional consideration in the sum of ILS 20 million, in addition to the agreed sum of ILS 130 million (paid), on the fulfillment of a number of cumulative conditions.  One of these conditions was not met, according to the defendant's claim, which relies on the text of the agreement in its literal sense, and therefore did not pay the additional consideration.  The claim is based on the plaintiffs' position, the essence of which is that the language of the agreement is not sufficiently clear, and that its interpretation justifies their acquittal of the additional consideration.

Background

1. The plaintiffs are Alon Blue Square Israel in a tax appeal (hereinafter: Blue Square Oak) and Dor Alon Finance in a tax appeal (hereinafter: Dor Alon), a company controlled by Alon Blue Square (hereinafter together: The plaintiffs). In the absence of a relevant distinction between the two for the purpose of their joint claim, they will be treated jointly as a rule.
2. As of 2015, the plaintiffs held together 49% of the share capital of Diners Club Israel in a tax appeal (hereinafter: Diners), which deals with credit cards. The defendant, credit cards to Israel in a tax appeal (hereinafter: C.A.L.), held the remaining shares (51%).  On November 29, 2015, the parties entered into an agreement for the sale of the plaintiffs' share in Diners to C.A.L.  (hereinafter: Agreement).
3. A significant source of profit for Diners at the time of the agreement was the credit card.YOU' that it issued. Using this card has provided fixed discounts and points earned on purchases at claimant-related retail chains.  The main rights to operate the customer club 'YOUwas in the hands of Mega Retail in a tax appeal (hereinafter: Mega), controlled by Blue Square Oak.  A cooperation agreement between the parties was in effect at the time, which serves both the food chains and the credit card company, which was intended to continue even after the agreement to sell the plaintiffs' shares in Diners.  There is no dispute about Mega's centrality in the club's activities YOU and its impact on the value of Diners as it is the most significant customer recruitment platform for distributing cards YOU.  Mega's continued activity, there is no dispute, was a pillar in determining the contractual consideration.
4. At the end of June 2015, a few months before the agreement was signed, Mega entered into insolvency proceedings, with a petition to approve arrangements with its creditors (liquidations (Central Districts) 61098-06-15 Mega Retail in Tax Appeal v. Alon Blue Square Israel Ltd.).  On July 15, 2015, the court approved a creditors' arrangement aimed at rehabilitating the company (hereinafter: The Creditors' Arrangement).  This arrangement has not been completed.
5. In view of the impact of Mega and its continued activity on Diners' value, the consideration in the agreement was determined after the completion of 'economic work' in the matter of Diners (hereinafter: The Economic Perspective), conducted by the accounting firm Deloitte (Hereinafter: Deloitte).
6. Deloitte's economic examination (see Appendix 2 to the statement of claim) presented two main scenarios for the value of Diners, which were derived from the uncertainty that surrounded Mega's future at the time: a scenario that was defined as "optimistic", which included a reduction in the club's activity YOU in the short term and improvement in the medium and long term thanks to the planned recovery plan in the Mega chain; and a scenario defined as "pessimistic" in which it was assumed that the recovery plan would not succeed and that Mega's supermarket chain would close in the short term. In the optimistic scenario, Diners' value is estimated at about ILS 300 million, and in the pessimistic scenario, about two-thirds of that.  The parties agree that the scope of the consideration in the agreement is determined by taking into account what is stated in the economic examination.

The Ottoman Settlement [Old Version] 19167.       On November 29, 2015, the parties signed the agreement; The consideration for the shares was divided into two main components: the first, which was conditional on conditions that were indisputably fulfilled by the date of completion of the transaction, a payment in the sum of ILS 130 million, an amount paid; and the additional consideration, which is the subject of this judgment, is in four additional installments of ILS 5 million each and ILS 20 million in total, the first of which was supposed to be paid on March 31, 2016 and every six months thereafter, all - all with the fulfillment of the conditions set out in clause 3.3 of the Agreement (hereinafter: Additional consideration payments).