IDB Inks Deal to Sell Third of Clal Insurance to Chinese Investors

Nochi Dankner’s IDB group announced Wednesday morning that a group of Chinese investors has agreed to buy a one-third of Clal Insurance’s shares for $1.5 billion, a 30% premium above the company’s market value. This comes three days before the decisive court ruling on IDB’s creditors’ bid to seize control of the debt-strapped group from Dankner.

Minutes later, the Finance Ministry’s commissioner for capital markets, insurance and long-term savings, Oded Sarig, ordered the controlling share in Clal transferred temporarily to a trustee, due to the chance that come Sunday morning, IDB’s creditors may seize control of the company. If this were to happen, this would be the first time in Israel’s history that an insurance company would not have a controlling shareholder.

Sarig said he was appointing former Israel Securities Authority chairman Moshe Terry appointed as Clal’s trustee. De facto, this means the state would be seizing temporary control of Clal.

Yet minutes after that, in an equally unusual move, Judge Eitan Orenstein ordered the seizure delayed for 24 hours until Sarig could provide clarifications. Orenstein, responding to a petition filed by IDB’s court-appointed observer Haggai Olman, is overseeing the court battle between IDB and its creditors.

Li Haifeng has come out publicly as the head of the investment group, but the identity of the other investors will be revealed only in 45 days. The investors have already placed $20 million in escrow toward the deal.

The 32% stake (NIS 1.47 billion) the Chinese investors are seeking in Clal valuates the insurance company at NIS 4.6 billion.

Previous attempts to sell the Clal shares have failed during negotiations, and it is not yet certain the deal will go through. Last week, Thai group Charoen Pokphand backed out of a deal to buy 30% of Clal.

Any deal requires regulatory approval by Sarig due to the large amount of public money under Clal’s management.

Orenstein gave IDB until Thursday to sell at least half of its holdings in Clal, or 27.5% of the company’s shares.

Parent company IDB Holding and subsidiary IDB Development owe creditors a total of NIS 8 billion. The Clal shares are owned through IDB Development.

A senior legal source involved in the debt arrangement said, “This isn’t exactly the Clal deal the judge expected. But on a scale of 0 to 100, it’s not 0, either. Now the question remains as to how the judge will see it.”