European private equity firm Permira has forced on Nochi Dankner's IDB Holding Corp. Ltd. (TASE:IDBH) a change in the terms of the acquisition of IDB's stake in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), and a substantial reduction in price. The $2 billion valuation that Danker demanded in the past is off the agenda, and in the proposed deal, the sale will take place in stages, with Permira having the right to withdraw at any stage. "Everyone sees what is happening in the world, and that has its price," a source close to the negotiations said today, referring on the falls on stock markets, to which Clal Insurance has not been immune.
IDB holds 55% of Clal Insurance. Under the new deal, Permira will by just 10% initially, at a valuation of $1.3 billion. This is 30% higher than Clal Insurance's current market cap ($1 billion), but only half the valuation that Dankner has demanded in the past, when IDB sources said that "if Nochi doesn't get the price he wants, he won't sell."
In the second stage, a year after the deal is signed, Permira will buy a further 10%, at a valuation of $1.5 billion for Clal Insurance. In the third stage, a year later, i.e. two years after the closing, Permira will buy the rest of IDB's stake (35%), this time at a valuation of $1.7 billion.
If the three stages go ahead as planned, the average valuation for Clal Insurance will be $1.6 billion. However, the price at the second and third stages is conditional upon certain milestones and Clal Insurance's performance, which very much depends on what happens on the capital market.
Published by Globes [online], Israel business news - www.globes-online.com - on September 6, 2011
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