The Chinese investment group seeking to buy Clal Insurance from IDB Development Corporation on Tuesday got an another month and a half to complete the deal, but also agreed to pay up to another 137.5 million shekels ($40 million) for the insurer.
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IDB Development’s board approved the extension to June 30 amid reports that the conglomerate’s new controlling shareholders, Moti Ben-Moshe and Eduardo Elsztain, were opposed to the sale negotiated when IDB was still controlled by Nochi Dankner.
The vote, which was taken Monday night, counted only IDB Development’s outside directors after the company’s legal adviser sought to preclude any problems of conflict of interest over the sale, which pits Ben-Moshe and Elsztain against trustees representing IDB Development’s parent company, IDB Holding Corporation.
A Chinese group led by JT Capital Fund has been seeking for close to a year to buy 32% of Clal for 1.47 billion shekels, reflecting a value for the entire company of 4.6 billion shekels. However, they haven’t been able to secure a license to own an insurance company from Israeli regulators.
The sale would inject badly needed cash into the indebted IDB group, which is why IDB Holding trustees favor going through with it. Ben-Moshe and Elsztain, however, believe that the sale undervalues Clal and want to hold on to it longer.
Under a new agreement between IDB and the group, if the Chinese receive approval by May 29 they will buy the Clal stake at a higher 4.8 billion-shekel valuation. After that date, Clal’s valuation will go up another 50 million shekels to 4.85 billion shekels, under the agreement.
The result is that if the Chinese group opts not only to buy 32% of Clal now but exercises an option to buy IDB’s remaining 23%, they will pay 137.5 million shekels more than the price originally negotiated.
The higher valuation put on Clal came after Amir Barnea, a Tel Aviv University professor and well-known financial analyst, revalued the business at between 4.6 billion and 5 billion shekels.
In a related development, the rescue plan for IDB Holding was formally completed this week, putting Ben-Moshe and Elsztain formally in control of IDB Development as of Wednesday, four months after a court awarded them control of the company. The pair will transfer 480 million shekels to IDB Development next month under the terms of the bailout arrangement.