Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva and managed by CEO Asaf Bartfeld, is expected to grant a discount to Chinese group Fosun in the deal for the sale of control in insurance company The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5). A source involved in the negotiations said, "It looks like there will be some discount, about 5%, on the price for the deal," adding that the parties were "in the home stretch towards signing a binding agreement." Delek Group and Fosun chose not to respond to the report.
Under the initial agreement between Fosun and Delek Group, signed in January 2015, Fosun was to buy 42% of the shares in Phoenix for a value equal to Phoenix's equity at the end of the third quarter of 2014 - NIS 3.7 billion, plus 4.7% interest, to be paid to Delek Group starting from the end of the third quarter last year until the deal is completed. The Phoenix share is traded at a market cap of over NIS 2.9 billion.
While the market believes that disagreements between Delek Group and the Chinese have emerged concerning the value for Phoenix in the deal, the Israeli holding company today reported that the parties in the giant deal "have reached an agreement to extend until May 29 the exclusivity period established in the non-binding memorandum of understanding between them for the sale of a controlling interest in Phoenix." The new deadline is Friday this week. A source informed about the process said, "It cannot be ruled out that there will be another extension of the exclusivity period between the parties."
In any case, the signing of a binding agreement by the parties is not the only obstacle they must overcome. Fosun must obtain authorization from the Supervisor of Insurance and Capital Markets to own a controlling interest in an Israeli insurer, and that is no simple matter. It is believed that Fosun has a good case to present to the Supervisor, because it already holds an insurer's license in the European Union (in Portugal) and in the US. In any case, the agreement involved at present is still a non-binding agreement between Delek Group and Fosun, and as of now, it is by no means certain that a binding agreement will be signed and/or the deal will be completed. Up until now, Fosun has conducted thorough due diligence for Phoenix, including many visits by its representatives to the company's offices in Israel.
Last year, Delek Group held advanced negotiations for the sale of control in Phoenix, managed by CEO Eyal Lapidot, to the Kushner family, based in the US. Those negotiations were for the sale of 47% of Phoenix out of the 52% owned by Delek Group at the same price mentioned in the non-binding agreement with Fosun (according to equity, plus an interest mechanism). These negotiations were unsuccessful, and given market assessments that the US buyers would find it difficult to obtain authorization from Supervisor for the deal, the parties broke off their negotiations.
Talks are currently taking place for the sale of another major insurance group - Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS). The information room for the sale of Clal Insurance is expected to open in the coming days, with several foreign entities expressing initial interest in the acquisition of control in the insurance company from IDB Development Corporation Ltd. (TASE:IDBD).
Published by Globes [online], Israel business news - www.globes-online.com - on May 25, 2015
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