Eduardo Elsztain and Moti Ben-Moshe, who are trying to lead the IDB group out of financially troubled waters, received a major setback on Sunday when the insurance regulator said she would probably not issue the two the license they need for IDB to continue to control Clal Insurance.
- Elsztain funding offer lifts IDB Development Corporation's outlook
- Ben-Moshe signals he will match Elsztain’s IDB injection
- IDB board approves capital injection as two main shareholders bicker
- IDB partners still at odds over plan to recapitalize holding company
Dorit Selinger, the Finance Ministry’s commission for capital markets, insurance and savings, believes that Elsztain and Ben-Moshe are personally qualified to hold an insurance license, but that IDB is too weak financially to act as a financier of last resort were Clal to need a capital infusion.
“The chances that the commissioner will approve the application [for a license] in its current format by December 31 are poor,” IDB Development Corporation, the publicly traded company at the apex of the IDB group, told the Tel Aviv Stock Exchange.
Together with Discount Investment Corporation, Clal Insurance, which is 55%-owned by IDB, is one of the holding group’s two biggest and most important holdings. The insurer and the prospect of its being sold is a key component of IDB’s eventual recovery, but the company trades on the TASE at a valuation of just 3.1 billion shekels ($790 million), or 0.7 times its equity, and pressure to sell it would likely elicit offers valuing the company at even less.
As a result, shares of IDB Development plunged 7.3% to close at 1.69 shekels in TASE trading yesterday.
IDB said it was now pursing talks with Selinger about ways of strengthening IDB’s capital base by reducing its debt. Elsztain and Ben-Moshe, who together control 64% of IDB, are committed to injecting another 395 million shekels into the holding company next year. But their partnership was been strained and they are openly talking about one buying out the other.
An alternative they are talking about with Selinger is to sell down their Clal holding according to a mutually agreed timetable, although not by selling shares on the stock exchange. They are also considering the possibility of selling all or part of Clal to Elsztain, Ben-Moshe or the two of them together.
In related news, Delek Group’s plan to sell control of its Phoenix Group insurance unit to Kushner Funding of New York appears to have fallen through. “Kushner’s exclusivity [period] is over and we are looking for alternative buyers for Phoenix,” Assaf Bartfield, CEO of Delek, told an investors’ conference last week.
Jared Kushner, son-in-law of New York real estate magnate Donald Trump, had agreed in principle last July to pay 1.7 billion shekels for 47% of Phoenix, but since then two deadlines to finalize the agreement have passed.
Selling Phoenix is in line with Delek’s strategy to shed most of its wide range of businesses to focus on energy exploration and production, particularly the Tamar and Leviathan gas fields.
Despite the setback, Phoenix shares closed up 1.2% at 11.25 shekels. Delek was up 0.2% at 1,148 shekels at closing time.