Li Ka-shing's flagship conglomerate Hutchison Whampoa and his namesake charitable foundation have cancelled a US$125 million deal to acquire a majority stake in Scailex, the parent of Israeli mobile and fixed-line network operator Partner Communications. In a statement filed with the Tel Aviv Stock Exchange, Scailex said a joint notice terminating the agreement due to adverse "material findings" was received by the company and controlling shareholder, Israel's Suny Electronics, from Hutchison subsidiary Persall and Kelburgh, a unit of the Li Ka-shing Foundation. Hutchison had arranged in June to buy a half stake in Scailex through Persall, while Kelburgh would buy a 25 per cent shareholding in the Israeli firm. Their acquisition would have put Hutchison back in charge of Partner after it sold the company in 2009 for US$1.38 billion to Scailex, the sole importer of Samsung Electronics mobile phones in Israel. When it bought Partner, Scailex had also received a US$300 million secured loan from Hutchison. Scailex owns 44.5 per cent of Partner, which operates under the "Orange" brand name. Partner's shares are traded on both the Tel Aviv Stock Exchange and the Nasdaq National Market. Hutchison said yesterday that Persall and Kelburgh exercised their right to terminate the deal "on the grounds that conditions under the agreement have not been fulfilled". The transaction stipulated that Scailex sell its Samsung cellular handsets import, distribution and services business to Suny for US$100 million. Israeli businessman Ilan Ben-Dov controls both Scailex and Suny. Scailex also agreed to buy back about half of its outstanding non-convertible bonds at 69 per cent of their total value. Hutchison had agreed to extend the repayment of its US$300 million loan to Scailex by three years, from 2014 to 2017, to help buttress the Israeli company's financial position. Scailex has total debts of US$760 million, including US$460 million owed to undisclosed third parties. In its filing, Scailex said: "The buyers [Persall and Kelburgh] expressed concern that it would not be possible to complete the purchase of the company's [Scailex's] bonds". Bondholders have resisted that condition on the grounds that the owners of Scailex - Ben-Dov, in particular - should not be compensated before bondholder debt is fully secured, according to a report yesterday by Israeli daily newspaper Haaretz . Another factor that Persall and Kelburgh cited for pulling out of the deal was the "significant decline" in Partner's second-quarter earnings results, according to Scailex. Partner, which was founded by Hutchison in 1997, reported last week that its second-quarter net profit fell 41 per cent to 120 million Israeli new shekels (HK$230.56 million), from 205 million Israeli new shekels a year earlier, due to more domestic competition, fewer subscribers and lower handset sales. Without elaborating, Persall and Kelburgh said they also discovered certain "inaccurate representations" made by Suny about the deal and other violations of the agreement, according to Scailex.