Delek expected to unveil new buyer for Phoenix

Yitzhak Tshuva  picture: Bloomberg

The anti-concentration law requires Delek to sell its controlling interest.

Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva and managed by CEO Asi Bartfeld, is continuing its efforts to sell the controlling interest in The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5). A few weeks after its most recent effort at a deal failed, market sources believe that Delek is likely to soon announce a new agreement in principle for the sale of control in the Israeli insurance and financial group.

A deal for selling Delek's shares in Phoenix to Chinese company Yango was called off in June. Like its predecessors (and like similar efforts in recent years by IDB Development Corporation Ltd. (TASE:IDBD) to selling the controlling interest in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS)), this effort failed due to difficulties in obtaining the necessary regulatory approval, particularly from Supervisor of Insurance, Capital Market and Savings Dorit Salinger. It is believed that US investment funds are involved in the current attempt.

The deal between Delek and Yango, signed in late August 2016, stipulated that Delek would sell its 52% holdings in Phoenix for NIS 1.95 billion, reflecting a NIS 3.7 billion value for the insurance company, 60% higher than its market cap at the time. The parties agreed in April to raise the value of the deal to NIS 2.15 billion, and again extended the agreement between them for the purpose of obtaining Salinger's approval.

Yango then embarked on a procedure with the Ministry of Finance Capital Market, Insurance, and Savings Department for obtaining authorization for the deal. Among other things, it reported that it had recruited Yonel Cohen, a leading figure in the local insurance sector, who was to have invested NIS 130 million in Phoenix shares, and who was slated for appointment as chairman of Phoenix.

Managed by president and CEO Eyal Lapidot, Phoenix has been controlled by Delek since 2006. The agreement with Yango was the fourth attempt in two years to sell control in the company to a foreign buyer, after three previous attempts - to US family Kushner, Chinese conglomerate Fosun, and US insurance company AmTrust - were unsuccessful.

Delek Group is obligated by the Promotion of Competition and Reduction of Concentration Law to sell its controlling interest in Phoenix, and also wants to sell the company as part of its strategy of focusing its business on energy. The same is true about Clal Insurance. Meitav Dash Investments Ltd. (TASE:MTDS), Israel's second largest investment house, is also playing a key role in the negotiations for its sale (all of the shares, not just a controlling interest) to a foreign concern – the XIO fund, which has combined with former Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) chairman, former Ness Technologies chairman, former IDB Group manager (for a short period following its collapse), and former Ministry of Finance director general Aharon Fogel.

Phoenix's current market cap is over NIS 3.7 billion, following a 30% climb in its share price over the past three years, including 11% in the past year. Delek Group has sold off most of its holdings in fields outside its core energy business in recent years, and is now also seeking to sell its holdings in the IDE Technologies desalination company. In addition to its energy business, Delek Group is also retaining its holdings in Delek US Holdings Inc. (NYSE:DK) and Delek Automotive Systems Ltd. (TASE: DLEA).

Published by Globes [online], Israel Business News - www.globes-online.com - on August 10, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Yitzhak Tshuva  picture: Bloomberg
Yitzhak Tshuva picture: Bloomberg
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