Four years ago, in November 2005, Bank Leumi held a tender for the purchase of the Psagot investment house, whose main business was managing mutual funds. There were several bidders, among them insurance company Migdal, Africa-Israel, York Capital Management, and even Apax. In the end, York won, and took over the investment house in September 2006 for NIS 1.28 billion.
At the time, there were those in the capital market who raised an eyebrow at the high price offered by York. Four years on, York Capital is exiting its investment in Psagot with an impressive return of 185%, or 42% a year for the three years in which it held the investment.
York invested NIS 618 million of its own in Psagot, the remainder coming from bank loans. The loan was taken over by Psagot itself after the acquisition, and it remains on its books.
After taking over Psagot, York brought in Plainfield Asset Management and Markstone, and reduced its stake to 57%, for which it will now receive NIS 1.76 billion, representing, as mentioned, a 185% return.
When York bought Psagot, it did so with Seneca Capital, which put in NIS 32 million and received 5% of the shares, the remaining 95% being retained by York. Seneca currently owns 3% of Psagot, and will receive NIS 93 million, giving it a return similar to York’s.
Plainfield, which came into Psagot less than two years ago, will also post a handsome return on its investment. The US-Canadian fund planned to buy provident fund company Gadish from Bank Hapoalim two years ago, but difficulties in financing the deal led to Psagot buying Gadish instead.
In that deal, Plainfield injected NIS 350 million into Psagot, and Psagot bought Gadish. Plainfield now owns 16% of Psagot, for which it will receive NIS 495 million, giving it a 42% return on its investment.
The Markstone fund, which became a shareholder in Psagot last year when Psagot took over Prisma, has decided not to sell its 24% stake for the time being, on the assumption that it will be able to obtain a higher return in the future. The returns mentioned above are the sole profits made by the sellers on their Psagot stakes, as the investment house has distributed no dividends since it was acquired by York.
Published by Globes [online], Israel business news - www.globes-online.com - on December 11, 2009
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