Private equity fund Markstone Capital Group is taking over Solomon Investments. Solomon recently acquired control of mutual fund management company PKN from Bank Hapoalim. PKN has NIS 21 billion under management in 74 mutual funds. The acquisition includes Solomon's financial market activities, which includes more than NIS 3 billion in portfolios and underwriting operations.
Solomon bought PKN under the Bachar recommendations, and Markstone's entry is also a result of the financial market reform. Markstone managers know the local financial market well: Ron Lubash managed investment bank Lehman Brothers Israel operations for ten years, while Amir Kess was a vice president at Arison Investments and involved in creating Arison's telecommunications portfolio (Partner Communications, Internet Gold and Eurocom). Markstone's American chair, Elliott Broidy, is the controlling shareholder in a U.S. investment firm with extensive market ties. Most of Markstone's $800 million in funds were raised from U.S. institutional investors.
After the deal, Markstone will hold a 60 percent interest in Solomon Holdings.
Solomon Holdings jointly holds Solomon Investments with Ilan Ben-Dov and other investors. Markstone will inject NIS 300 million in Solomon Investments for a 60 percent stake. Berger and Ben-Dov will each inject NIS 100 million, creating shareholders equity of NIS 500 million for Solomon Investments, now easily capable of financing the PKN deal.
The deal will make Solomon Investments into one of the heaviest hitters in the financial market, able to buy other financial banking assets and create a huge investment firm. The group plans to purchase provident funds, advanced training funds and other financial assets, as well as bring other foreign investors into the Israeli market to establish an American-style private investment bank. They plan to reach at least NIS 60 billion in assets under management.
The banking sector must divest of provident and mutual fund holdings under a comprehensive market reform drafted by Finance Ministry director general Joseph Bachar.
Solomon took the market by surprise when it bid NIS 954 million for PKN. However, the small company that Berger took over three months ago did not have the equity necessary to finance such a large-scale deal. Nonetheless, sources close to Solomon say the financing for the deal was secured before Markstone came into the picture.
Markstone was a contender for PKN two weeks ago. However, the fund's NIS 900 million bid was not enough. Markstone was established two years ago when the Israeli economy was in crisis, but Lubash and Kess managed to sell the idea to American institutional investors.
Solomon Holdings' announcement to the stock exchange confirmed the talks. Markstone stated that it does not comment on its business dealings.
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