Delek : Sale of Holdings in Republic Companies Inc.

Tel Aviv, April 16, 2014. Delek Group (TASE: DLEKG, OTCQX: DGRLY) ("the Company") Following on its immediate report of April 10, 2014 (ref. no. 2014-01-043764), the Company hereby announces that on April 13, 2014 Delek Finance US Inc. ("Delek Finance"), a wholly-owned subsidiary of the Company, holding 100% of the share capital of Republic Companies Inc. ("Republic"), signed an agreement with a group of US investors ("the Buyers"), for the sale of control of 55% of Republic's share capital, for a total consideration of USD 121 million ("the Consideration"), which reflects a value of Republic of USD 220 million.

The Buyers were given an option to buy Republic's remaining share capital (45%). This option will remain valid for the earlier of either two years from completion of the transaction, in accordance with the arrangements set out in the agreement. The consideration for the option, if it shall be exercised, will be USD 99 million plus 6.5% annual interest.

Payment of the Consideration for the transaction shall be as follows:

50% of the Consideration is payable in cash, and the remaining balance will be extended by Delek Finance as a Vander Loan to the Buyers, over a period of 3 years, with 6.5% annual interest. This interest is payable on a semi-annual current basis, with the loan principal payable at the end of 3 years from completion of the transaction. All shares sold (55%) will serve as collateral to secure the loan. In addition, various financial covenants and events have been specified, which will entitle Delek Finance to call for immediate repayment of the loan.

In the event that the option is exercised, 50% of the option consideration shall be payed in cash and the balance shall be made available as a loan of Delek Finance to the Buyers for a period of up to 3 years from the date of completion of the first transaction according to the terms detailed above.

Completion of the transaction is subject to several closing conditions including obtaining the regulatory approvals for the Buyers to be the controlling shareholders of Republic.

At the same time, Delek Finance has signed a shareholders' agreement with the Buyers, which regulates appointment of directors for as long as it holds Republic shares and/or the loan has not been repaid. In addition, the shareholders' agreement provides protections for the minority interest in Republic, including protections against dilution and rights relating to the share of Republic shares (right of first refusal, and tag along rights).

At this point the Company is assessing the accounting implications of the above agreement for the transaction and the impact of the payment on its financial statements.

In this connection it should be noted that the estimated valuation of Republic derived from the above transaction, taking into account the estimated value of the option described above, is not materially different from the Company's investment balance in Republic as included in the Company's financial statements to December 31, 2014.

The Company hereby clarifies that there is no certainty that that the transaction will be completed according to the aforementioned terms including on account of non-fulfillment of the closing conditions stipulated in the agreement. The Company will report in a further Immediate Report of the transaction should be completed.

This is a convenience translation of the original HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on April 16, 2014.

The Delek Group, Israel's dominant integrated energy company, is the pioneering leader of the natural gas exploration and production activities that are transforming the Eastern Mediterranean's Levant Basin into one of the energy industry's most promising emerging regions. Having discovered Tamar and Leviathan, two of the world's largest natural gas finds since 2000, Delek and its partners are now developing a balanced, world-class portfolio of exploration, development and production assets with total gross natural gas resources discovered since 2009 of approximately 37 TCF.

In addition, Delek Group has a number of assets in downstream energy, in water desalination, and in the finance sector.

For more information on Delek Group please visit www.delek-group.com

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