Exhibit 99(b)(6)
[LETTERHEAD OF GIZA Economic Consulting and Financial Management (1988) Ltd.]
October 15, 1998
The Board of Directors,
Discount Investments Corporation Ltd.,
14 Beit Hashoeva Lane,
Tel-Aviv, Israel.
Dear Members of the Board of Directors,
Re: Fairness of the exchange ratio between the shares
of Discount Investments Corporation Ltd. and the
shares of PEC Israel Economic Corporation - Amended
1. We were requested by you to give our professional opinion regarding the
fairness of the exchange ratio determined in the context of an engagement
in an agreement for the transfer of 14,937,792 common shares of US $1 par
value each of PEC Israel Economic Corporation ("PEC"), which comprise some
81.4% of the rights in this Company, held by IDB Development Corporation
Ltd. (hereinafter: "IDB Development") to Discount Investments Corporation
Ltd. ("Discount Investments") in consideration for a private placement of
17,390,593 common shares of NIS 1 par value each of Discount Investments
(hereinafter: "the Private Placement"). The exchange ratio was determined
according to an average ratio of 1.327 between the net assets value of
Discount Investments and the net assets value of PEC. It should be
mentioned that the investments portfolio of the two companies is very
similar in composition, and about 80% of the net assets value of the two
companies come from identical investment sources in over 40 companies.
According to simulations carried out by us, the exchange ratio has very
low sensitivity to changes within reasonable ranges (+/- 25%) of the
evaluation of the net assets value of the companies.
2. The opinion focuses on the question whether the exchange ratio stipulated
in the said agreement reflects, from an economic point of view, a fair and
reasonable exchange ratio from the point of view of Discount Investments.
3. In preparing our opinion, we based ourselves on the data included in the
opinion of Professor Ithak Swary and Uri Cohen, C.P.A. of Ithak Swary Ltd.
dated October 15, 1998 ("Swary") and we assumed their correctness,
accuracy and completeness. We were not requested and we did not carry out
independent checks to verify the above-mentioned data or to verify the
results of operations of Discount Investments and PEC and/or the companies
held by them.
4. For the purpose of preparing our opinion we studied the following
documents:
4.1 Swary's opinion.
4.2 Working papers of Ithak Swary Ltd. with regard to Swary's opinion.
4.3 The audited financial statements of Discount Investments and PEC for
the year ended December 31, 1997 and the reviewed financial
statements for the period of six months ended June 30, 1998.
4.4 The audited financial statements of the companies held by Discount
Investments and PEC for the year ended December 31, 1997 and the
reviewed financial statements for the period of six months ended
June 30, 1998.
4.5. The 10-K Report of PEC for the year ended December 31, 1997.
4.6 The 10-Q Report of PEC for the period of six months ended June 30,
1998.
4.7 Public data and reviews which were published about the companies and
the branches in which they operate.
4.8 Clarifications given to us by Discount Investments and PEC, on our
request regarding the details of the agreements and items of the
financial statements.
4.9 Immediate reports of Discount Investments and IDB Development dated
October 15, 1998 relating to the Private Placement.
5. For the purpose of preparing our opinion we met with Professor Swary and
Uri Cohen, C.P.A. of Swary and received from them explanations and details
relating to Swary's Opinion.
6. The Opinion does not include a stand or a recommendation whether to carry
out the private placement. The Opinion is not a recommendation to the
shareholders of Discount Investments and/or PEC and/or IDB Development on
how to vote at the General Meeting regarding the Private Placement.
7. In the past we carried out, for payment, various economic work for
Discount Investments and companies held by it.
8. We hereby certify that we do not have a personal interest in Discount
Investments and/or PEC and/or IDB Development Ltd., and that we do not
have a personal interest regarding the exchange ratio determined. It
should be clarified that Giza was not a partner in the negotiations
between Discount Investments and IDB Development.
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9. Regarding the Opinion, Discount Investments undertook to Giza Economic
Consulting and Financial Management (1988) Ltd. ("Giza") as follows: if
Giza will be sued in a legal procedure to pay any amount to a third party
for a cause which is likely to result from, directly or indirectly, this
Opinion, Discount Investments will compensate Giza for any reasonable
expenses which Giza will incur or will be required to pay for legal
representation, legal counseling, professional consulting, defending in
legal proceedings, negotiations etc. Discount Investments will also
compensate Giza for any amount which it will be required to pay, in a
legal proceeding, to a third party, in excess of one million US dollars.
The obligation to compensate will not apply if it is found that Giza acted
in rendering its services relating to this Opinion, with serious
negligence or maliciously.
10. After studying the documents mentioned in Clause 4 and subsequent to our
meetings as detailed in Clause 5, we estimate, to the best of our
professional opinion, that the exchange ratio determined in the agreement
mentioned in Clause 1 above, reflects a fair and reasonable exchange ratio
from the point of view Discount Investments.
We wish to emphasize, that in light of the legal limitations connected
with the possibility of a public issue in the United States of Cellcom
Israel Ltd. ("Cellcom"), whose shares are held, among others, by Discount
Investments and PEC, we were requested by you to check the fairness and
reasonability of the exchange ratio taking into account general
indications relating to the range of values of Cellcom. The indication is
based on the comparison of market prices and multipliers of similar
European cellular companies, and taking into consideration the discount
resulting from a lack of marketability and liquidity in the Cellcom
investment as compared to the comparative group. We should state, that the
holdings of Discount Investments and PEC in Cellcom are material to the
economic value, however by lower comparative effect on the exchange ratio
due to identical holdings in Cellcom. It should be emphasized that in view
of your aforementioned directive, we did not carry out an evaluation and
we did not apply other procedures regarding the investment in Cellcom.
As, in our evaluation the indication checked by us in the field of the
range of variance checked by us with regard to the value of Cellcom (+/-
25%) reflect a reasonable range of the economic value of Cellcom, and as a
change in the estimated value of Cellcom in the fields mentioned does not
result in a significant variance in the results of the exchange ratio, in
our opinion this limitation does not detrimentally affect the
reasonability and the validity of test of reasonability and fairness of
the exchange ration.
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11. This Opinion does not express an opinion on the price in which the shares
of Discount Investments and/or PEC will be traded after the notice of
approval of the Private Placement. The evaluation of the exchange ratio is
not an evaluation of the assets or of the share capital of Discount
Investments and/or PEC.
12. We hereby agree that this Opinion will be attached and/or mentioned in the
Immediate Report.
Yours sincerely,
( - )
Zvi Shechter
Joint General Manager
GIZA Economic Consulting and
Financial Management (1988) Ltd.
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[LETTERHEAD OF GIZA Economic Consulting and Financial Management (1988) Ltd.]
December 15, 1998
The Board of Directors,
Discount Investments Corporation Ltd.
14 Beit Hashoeva Lane,
Tel-Aviv, Israel
Dear Members of the Board of Directors,
Re: Opinion dated October 15, 1998 regarding to the fairness of the exchange
ratio between the shares of Discount Investments Corporation Ltd. and
the shares of PEC Israel Economic Corporation
1. On October 15, 1998 an opinion was submitted to you (hereinafter:
"Opinion") relating to the fairness of exchange ratio fixed in the context
of engagement in an agreement for the transfer of 14,937,792 common shares
of US $1 par value each of PEC Israel Economic Corporation ("PEC"). We
were requested by you to check whether there were significant developments
or changes from the date of the opinion relating to the net asset value of
the corporations, which should require a change in the Opinion.
2. As we stated in the Opinion, in view of the similarity in the investment
portfolio of the two companies, the exchange ratio has a low sensitivity
to changes within reasonable ranges of the evaluations of the companies
held by Discount Investments Corporation Ltd. ("Discount Investments") and
PEC.
3. For the purpose of the said check, we studied the Immediate Amended Report
of Discount Investments, we studied the financial statements of Discount
Investments, PEC and the main companies included in their investment
portfolios for the third quarter of 1998, we checked data available to the
public (including developments in the share prices of those affiliated
companies traded) and reviews published on the companies and on the
branches in which they operate, and we received additional data and
clarifications from the management of Discount Investments and PEC.
4. In light of the procedures we applied, the principles of which are
detailed above, and in view of the low sensitivity, as mentioned, of the
exchange ratio to changes in the values of the affiliated companies, in
our opinion, despite changes which took place in the evaluations of some
of the affiliated companies, there were no significant developments or
changes from the date of the Opinion relating to the net assets value of
Discount Investments and PEC, which would require a change in the Opinion.
5. It should be emphasized that this letter should be read together with our
letter dated October 15, 1998.
6. This letter does not constitute a reevaluation of the exchange ratio.
7. In addition, we were requested to give our professional opinion regarding
the fairness of the issue of 10,712 additional shares of Discount
Investments to IDB Development Corporation Ltd. in consideration for 3,484
of Properties and Building Ltd., based on the net assets value of Discount
Investments and the value of Properties and Building Ltd. as determined in
the evaluation of the said exchange ratio. In our opinion, the issue of
10,712 additional shares of Discount Investments in consideration for
3,484 shares of Properties and Building Ltd. is fair and reasonable from
the point of view of Discount Investments.
8. We agree that this letter be included and/or mentioned in the Immediate
Amended Report which will be published with regard to the engagement.
Yours sincerely,
( - )
Zvi Shechter
Joint General Manager
GIZA Economic Consulting and
Financial Management (1988) Ltd.
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