Sirius Int'l buying Delek Group's Phoenix stake in stages

Yitzhak Tshuva

The initial purchase is 4.9%. Sirius will buy Delek Group's remaining 47.4% at a later stage subject to regulatory approval. 

Fifth time lucky? Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, has once more signed an agreement for the sale of its holding in insurance company The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5). This time, the nominated buyer is Sirius International which, according to the description by the seller and the buyer, is "an international company with insurance licenses in the US, Sweden, and the UK." Sirius is currently controlled by China Minsheng.

The deal is in two stages. Initially, and immediately, Sirius bought 4.9% of The Phoenix, a holding that does not require regulatory approval, for a cash payment of NIS 208 million, 8% above the market price of the shares.

In the second, and main, stage, which is not certain to take place because of the requirement for regulatory approval in Israel, Sirius will buy Delek's remaining shares in The Phoenix (47.4%) and will become the controlling shareholder in the Israeli financial services group. In this stage, which is also dependent on a due diligence examination by the buyer, Delek will receive NIS 2.3 billion, which values The Phoenix at NIS 4.8 billion, more than 20% above its current market cap. In total, Delek will receive NIS 2.5 billion, representing a premium, on average, of 22% on the price of The Phoenix on the Tel Aviv Stock Exchange this morning.

Sirius has been looking at the Israeli insurance market for some time. It recently considered buying control of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) from Eduardo Elsztain's IDB Development.

The Phoenix, which holds investment house Excellence, has been the subject of sales negotiations for a long time. Delek Group wishes to focus on its energy business, and in any case has to sell The Phoenix in order to comply with the Concentration Law. Three years ago, a non-binding MOU was signed for the sale of the company to the Kushner family of the US. About a year later, a binding agreement was signed with Chinese company Fosun. After that there was talk of a deal with AmTrust, and then with Chinese firm Fujian Yango. All these negotiations ended without a deal.

It is therefore far too early to congratulate Delek Group on a done deal. Any holding of more than 5% in a financial institution requires the approval of the Capital Market, Insurance and Savings Authority, and the road to that approval can be a long and rocky one, particularly for Chinese-controlled firms. Sirius therefore stresses that it is an American company that was founded in Sweden and that holds licenses in OECD countries.

At any rate, after the prolonged regulatory sagas that previous sale attempts have gone through, Delek Group now says that "the sale agreement includes a short and well-defined timetable for submitting the license application and for obtaining the required regulatory approvals." Within 60 days the buyer has to decide about the second stage of the deal, and then to file a license application within 45 days.

Delek Group says that the deal gives it an accounting profit of NIS 400 million. It is not clear when this profit will be recognized.

Published by Globes [online], Israel business news - www.globes-online.com - on September 14, 2017

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

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