Bidders weren't told about espionage probe

TEL AVIV — An investment consortium including Haim Saban has settled a spat with the Israeli government over the purchase of a 30% stake in telco Bezeq, which owns half of digital satcaster Yes.

In May Saban Capital Group, private equity firm Apax Partners and pharmaceuticals magnate Mori Arkin bought the government’s controlling share for $972 million. They also received a five-year option for another 10.66%.

Four weeks later the government lifted a gag order revealing that two Bezeq subsidiaries — the Pelephone cell phone operator and Yes — were involved in an industrial spying scandal. They had employed detectives who allegedly used Trojan horse software to spy on rival companies.

The buyers asked the state to hold them blameless in case of damages, pointing out that the government knew about the industrial espionage probe but didn’t tell the bidders.

Apax Partners’ spokeswoman in Israel, Tamar Levine, said they reached a compromise this week in London with Israeli Finance Minister Benjamin Netanyahu. If a court rules against Bezeq in the spy case, 30% of the legal cost will be discounted from the five-year option the investors may exercise to acquire the extra 10.66% of Bezeq.

The Israeli government also agreed not to charge the Apax-Saban-Arkin group any interest for the first two years of the option term.

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