Treasury Won’t Veto Sale of Israeli Companies to Chinese

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Prime Minister Benjamin Netanyahu clinking glasses with his Chinese counterpart, Li Keqiang, May 8, 2013. Credit: AP

The Sinophobia that has erupted in the Knesset doesn't seem to be pervading the Finance Ministry.

Chinese companies are vying to buy Clal Insurance, one of Israel’s largest insurers, and Tnuva, the country’s biggest food maker, in separate transactions that could add up to billions of shekels. Treasury officials told TheMarker that the Chinese shouldn’t be treated any differently than other foreign investors, and that no special obstacles to acquisitions by Chinese firms should be placed.

On Sunday, the Ministerial Committee for Legislation rejected a private member’s bill sponsored by MK Avishay Braverman (Labor) that would have hindered sales of strategic Israeli companies to foreigners. The legislation would have defined as strategic any company employing 1,000 or more people or having received 50 million shekels ($14.5 million) in state aid over the previous five years.

The committee’s decision comes days after the Knesset Finance Committee held a session on the sale of Clal to a group of Chinese and Singaporean investors led by JT Capital.

MK Zahava Gal-On (Meretz) told the committee she feared that some 150 billion shekels of the public’s money managed by Clal would be controlled by foreigners. She said she would ask Attorney General Yehuda Weinstein to block the sale until the government made clear how it would protect the public’s money.

Gal-On made the same request of Dorit Salinger, the Finance Ministry’s director of capital markets, insurance and savings, who must approve the deal. Salinger isn’t expected to rule the sale out simply because the buyers are Chinese.

A number of Israeli insurance companies have been controlled by foreigners, including Migdal, the country’s largest insurance firm, which was once owned by Italy’s Assicurazioni Generali. The American firm AIG currently operates in Israel. Regulators have already ruled that the top managers of insurance companies must be Israeli, including the chairman and most directors.

But it’s possible that due to Chinese firms’ low transparency, Salinger may set further conditions, even if she lets the sale go through. It's also not yet clear whether she would put limits on how pension savings could be invested by Clal.

The sale of Tnuva by British private equity fund Apax Partners to Bright Food, a company controlled by the Chinese government, is a case of one foreign investor selling to another. The Finance Ministry has no role in such a deal and no right to approve or veto it, ministry officials say.

In any case, the treasury isn’t considering intervening in Tnuva; officials simply see few if any problems with this transaction. Tnuva’s biggest asset is its strong share in the domestic food market, so the Chinese have no reason to do anything to harm its Israeli operations.

Still, the sale is a sensitive matter; the committee that is studying ways to lower the cost of living is considering moves such as price controls or even breaking Tnuva up into a number of smaller companies. To avoid any diplomatic problems with China, the Finance Ministry has notified Tnuva of various plans under consideration.

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