Hapoalim, IDB clash over sale of Clal Insurance

Zion Kenan  photo: Tamar Matzapi
Zion Kenan photo: Tamar Matzapi

The bank claims the right to sell its shares to any party acquiring control of Clal Insurance.

The negotiations for the sale of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) to Chinese company Macrolink are becoming tangled. The end of 2015 is the deadline for signing an agreement for the sale by IDB Development Corporation Ltd. (TASE:IDBD) of a controlling interest in Clal Insurance set by Supervisor of Capital Markets, Insurance, and Savings Dorit Salinger. Because of the time taken by the negotiations, Salinger granted IDB Development a five-day extension until January 5, 2016. Another obstacle has surfaced, however: IDB Development today announced that Bank Hapoalim (TASE: POLI), which owns a 9.5% stake in the insurance company, was claiming that "under the 1998 shareholders agreement… the bank has the right to join the sale of Clal Insurance shares to the strategic partner, and a the right to veto the strategic partner." Bank Hapoalim , managed by CEO Zion Kenan, has therefore sent the IBD Development board of directors a letter asking it "to inform it of any transaction for the sale of Clal Insurance shares a reasonable time in advance of the transaction being implemented in order to enable the bank to join the transaction, inform it of the strategic partner's identity, and deliver the wording of the sale agreement to it, insofar as one exists, so that it can decide on its position with respect to joining the agreement."

Bank Hapoalim and Macrolink have not yet communicated on the matter, but if Macrolink has no wish to buy more Clal Insurance shares beyond what has already been discussed, the bank believes that the Clal Insurance shares to be sold should be divided proportionately between the bank and IDB Development.

IDB Development, controlled by Eduardo Elsztain, said in its response to Bank Hapoalim, "The company plans to respond to the bank that under the circumstances, the provisions of the shareholders agreement concerning the addition of a strategic partner do not apply to the current transaction (if it takes place), and the bank therefore does not have rights with respect to the current transaction." IDB Development added, "A similar query by the bank in August 2013 concerning a previous transaction for sale of the company's holdings in Clal Insurance (which was signed, but not completed, R.S.) was answered the same way."

Bank Hapoalim's 9.5% stake in Clal Insurance is currently worth NIS 251 million. According to the generous premium that Macrolink is expected to pay to IDB Development if the deal is signed and approved, the bank will receive much more than this by joining the deal.

Unsolved disputes

The sale being conducted by the board of directors of IDB Development, while Ministry of Finance-appointed trustee for the controlling shares in Clal Insurance Moshe Tery is only providing advice. If the parties are unable to reach agreement and sign a binding contract by January 5, however, and if they do not receive a further extension, the trustee is authorized by the Ministry of Finance to sell the shares in any manner he sees fit, including through the stock exchange, which would deprive IDB Development of a control premium on the sale. As far as is known, Macrolink has agreed to pay NIS 2.4 billion for IDB Insurance's 55% controlling interest in Clal Insurance, reflecting a 70% premium on the market price, and the proceeds will be adjusted according to Clal Insurance's shareholders' equity at the time of the sale.

It is believed that IDB Development and Macrolink have settled almost all the particulars of the deal, but a number of disagreements are still outstanding, including Macrolink's refusal to undertake to pay agreed compensation if the deal is called off for any reason whatsoever. IDB Development is demanding a guaranteed breakup fee from the Chinese company, believed to amount to NIS 150 million. At the same time, sources close to the negotiations believe that chances are very good that agreements will be signed "within days." If and when the business agreements hurdle is overcome, the effort to overcome the next, even higher, obstacle - obtaining approval from Salinger - will begin. Macrolink needs to obtain this approval for holding a controlling interest in Clal Insurance by the end of the first half of 2016. Past experience indicates that this is a difficult task for Chinese companies, so it is therefore premature at this stage to predict whether the deal will be successfully completed.

Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Zion Kenan  photo: Tamar Matzapi
Zion Kenan photo: Tamar Matzapi
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