Four Chinese Groups in Race to Buy Israeli Insurance Firm Clal

Most committed so far is joint bid by Li Haifeng and Tianan Insurance.

Daniel Bar On

Clal Insurance, Israel’s No. 2 insurer by market capitalization, will likely be taken over by a Chinese buyer if it is sold at all, making it the second big Israeli insurance company to come into Chinese hands.

Clal Insurance confirmed on Wednesday that its parent company, the IDB Development Corporation, had received “several” offers in principle to buy IDB’s 55% stake. It didn’t name the bidders, but sources said all four are Chinese companies and one, a tie-up between the Hong Kong tycoon Li Haifeng’s JT Capital and China’s Tianan Property & Casuality Insurance, separately confirmed it was in the race.

The other three are China Minsheng Investment Corporation based in Shanghai; XIO, a Hong Kong investment fund that in June agreed to pay $510 million to buy the Israeli medical-device maker Lumenis; and a closely held Chinese investment group called Microlink.

“We are interested in buying Clal Insurance as a strategic business and as a long-term holding,” said Tainan Chairman Hong Bo in a statement. “We bring with us professional expertise in insurance, an active and professional infrastructure and deep knowledge if regulatory requirements.”

The interest in Chinese companies marks a further tightening in business ties between Israel and China. Earlier this week, the Israeli agro-chemicals maker Adama was reported to be readying a listing on the Shezhen Stock Exchange through a reverse merger with a Chinese company.

Tnuva, Israel’s biggest food maker, was acquired by China’s Bright Food earlier this year and in June Delek Group agreed to sell its 52% stake in Phoenix Holdings, Israel’s fourth-largest insurer, to China’s Fosun International.

Shares of Clal fell 2.2% to 66.54 shekels ($17.18) in Tel Aviv Stock Exchange trading Wednesday, leaving it with a market capitalization of 3.8 billion shekels.

Eduardo Elsztain, IDB’s controlling shareholder, is reportedly interested in selling the Clal stake but only for a valuation that approaches its shareholders’ equity, which stood at 4.3 billion shekels at the end of March. Failing that, Elsztain is reportedly ready to shore up IDB’s capital base by injecting hundreds of millions of shekels.

Israeli regulators have denied IDB an insurance license out of concern that it is too weak financially to act as a financier of last resort were Clal to need a capital infusion.

The Li Haifeng-Tianan group has shown the most commitment to acquiring Clal. Over the last several months Bo, whose company controls 85% of the venture, and Li Haifeng have visited Israel and met with IDB and Clal management as well as with Dorit Selinger, the treasury official in charge of insurance.

It is ready to begin due diligence as soon as IDB gives it the go-ahead. “We are very impressed with Clal’s management, headed by CEO Izzy Cohen,” Li said in the statement.