Less than two days after the collapse of an agreement to sell Phoenix Insurance to a Chinese group, Delek Group said yesterday it had lined up a U.S. buyer
Delek, a holding company controlled by Yitzhak Tshuva, said only that the buyer was a publicly traded foreign company. Sources told TheMarker that the buyer was New York-based AmTrust Financial Services, which would pay about 1.7 billion shekels ($461 million) for Delek’s 52.3% controlling stake in Phoenix, although the agreement allows it to buy as little as 47.5%.
That would be slightly less than the 1.8 billion shekels that China’s Fosun International had offered, but this time the sale is more assured of meeting the requirements of regulators and going through. Delek shares ended up 2.3% at 636.20 shekels and Phoenix finished up 4.8% at 8.76. AmTrust’s shares were down 0.6% at $25.45 in late trading in New York.
The agreement isn’t the first between the two companies. In September Delek agreed to sell its controlling stake in Texas-based insurer Republic Companies to AmTrust. The transaction is expected to close in the first half of 2016.
AmTrust and Delek declined to comment, and AmTrust has issued no statement by press time.
“The purchase price reflects a big premium to the average book value in the industry,” Meir Slater, the head of research at Bank of Jerusalem, told Bloomberg News. “The potential deal is also increasing bets that the other Israeli insurance providers up for sale, such as Clal Insurance, will be able to find buyers
Under nonbinding letter of intent with AmTrust, Delek will sell Phoenix for 87.5% of the company’s book value as of December 31, a figure that won’t be publicly available until the company released its fourth-quarter financial statement.
Delek said half the money would be paid in cash when the agreement is completed. A deal for Phoenix was conditional on reaching a detailed binding agreement within 30 days of the signing of the letter of intent, Delek said.
The new Phoenix sale is an unusual turnaround for Delek, which has been selling off assets to focus on its core energy business, which centers on the Tamar and Leviathan natural gas fields offshore Israel.
But after a year of negotiations the deal with Fosun was running up against regulators’ concern that the Chinese company did not meet the standards for obtaining an insurance license. That concern was underlined in December, when Fosun chairman Guo Guangchang, disappeared briefly. He was later said to have been assisting Chinese police with an investigation.
The abortive sale of Phoenix to Fosun came on the heels of another failed deal to sell an Israeli insurer to a Chinese buyer. Last month, Macrolink backed out of an agreement to buy Clal Insurance from the IDB group.