After Israeli authorities failed to grant approval for a control license, the Hong Kong-based holding group Hutchison is exploring the sale of its controlling state in the mobile operator Partner Communications.
Hutchison, which is controlled by billionaire Li Ka-shing, gained control of Israel’s second-largest mobile company last November after Haim Saban opted to relinquish control rather than repay a loan he owed Hutchison. Shortly afterward, the Hong Kong company applied for the license, expecting that it would be approved quickly because it had been one of Partner’s founding shareholders a decade earlier.
However, its application came amid an increasingly bitter trade war between the U.S. and China. The Trump administration has been pressuring Israel to keep Chinese companies at arm’s length from key infrastructure contracts and holdings.
Israel’s Communications Ministry sought opinions on the Hutchison application from other government bodies, including the Shin Bet security service and the treasury foreign investment committee. Their opinions have been kept confidential. Although the ministry has not rejected Hutchison’s application, the two sides have not had any contacts for several months on the issue.
A source involved in the process said Hutchison’s Israeli representatives have come to understand that given the current geopolitical situation, an approval will not be forthcoming.
The Hong Kong company is now exploring the sale of its 27% stake in Partner, but the process is unlikely to begin anytime soon. Hutchison would rather wait for the global coronavirus crisis to end, which should enhance Partner’s value. While other telecoms shares traded on the Tel Aviv Stock Exchange have risen in recent months due to improved industry prospects, Partner stock is down 9.8% this year, giving the company a market cap of 2.5 billion shekels ($750 million).
The source said that if it proves difficult to find a controlling shareholder to buy the stake, Hutchison may end up selling the shares to the public on the TASE or to financial institutions.
- HOT seeks to buy Partner for 3 billion NIS in giant merger
- Chinese corporation wants to regain control of Israeli Partner cellular firm
- Israeli American billionaire Haim Saban poised to cede Partner stake to Chinese firm
Hutchison isn’t the first Chinese company to meet up against regulatory barriers in Israel. Even before the trade, the Chinese company Fosun scrapped a deal to buy the insurance company Phoenix in 2016 after failing to win regulatory clearance a year after applying.
U.S. Secretary of State Mike Pompeo was in Israel at the end of August, during which he reportedly renewed pressure on Prime Minister Benjamin Netanyahu to bar Chinese companies from Israel, in particular the telecommunications sector Chinese companies want to bid on 5G mobile contracts that Israeli firms will soon be awarding.
Hutchison, as well as the relevant Israeli authorities, declined to comment.