Sources inform ''Globes'' that the Capital Markets, Insurance and Savings Supervision Department at the Ministry of Finance is reportedly leaning against the deal in which IDB Holding Corp. Ltd. (TASE:IDBH) proposes to sell the controlling stake in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) to sister company Koor Industries Ltd. (TASE:KOR). A market source believes that the Ministry of Finance "is dissatisfied by the present proposal in which the company is planning a parties at interest deal."
The Ministry of Finance is reportedly displeased by the proposed deal because it will result in the controlling interest in Clal Insurance becoming one step further removed from IDB Holding's controlling shareholder (Nochi Dankner and his partners, the Livnat and Manor families), who received the control permit in Clal Insurance. In the IDB Holding corporate pyramid, Koor is two levels below IDB Development Corporation, which currently controls Clal Insurance. Furthermore, in view of instructions under which the Ministry of Finance grants control permits in an insurance company, the ministry will probably also demand that Clal Insurance's controlling parties improve their capital position.
A market source said that the Ministry of Finance's position is presumably "if you want to control an insurance company, you control it. There is no 'approximately'." However, so far as is known, the ministry has not yet made a final decision on the matter, and its dissatisfaction is not necessarily the final word as far the closing of the deal is concerned.
IDB is continuing to promote the transfer of control in Clal Insurance, which is run by CEO Izzy Cohen. For IDB, such a deal will bolster the capital position of the controlling shareholder in Clal Insurance, which itself is financially sound.
A source close to the company said, "This is a huge strengthening of IDB Development, amounting to billions of shekels in financial soundness and liquidity. The parent company that will hold Clal Insurance will have top quality financial soundness. I believe that the regulator will embrace this deal, because it wants financial soundness and security."
Last week, IDB Development notified the TASE it had sent an official proposal to Koor "to open negotiations for the sale of all or part of the holdings in the insurance company on the basis of a valuation that will be by an independent outside assessor. This is part of a possible offer also to acquire part of the public's holding in Clal Insurance."
IDB Development added, "IDB Development's board of directors has appointed the members of the company's audit committee as an independent committee authorized, among other things, to review the details and terms of this business idea."
Closing a deal depends on obtaining many permits, including from the Capital Markets, Insurance and Savings Supervision Department. IDB said, "At this stage, there is no assurance that the deal will be closed… of that the necessary permits will be obtained."
IDB Development owns 55% of Clal Insurance worth NIS 1.64 billion. IDB Development will reportedly ask Koor for NIS 2 billion for the shares (including the control premium). For IDB Development, the sale will transfer Koor's cash reserves to itself, which will enable it to deal with its huge bond debt.
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2013
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