Phoenix Sale in Doubt Amid Turmoil at Chinese Buyer

Shares in seller Delek Group fall as Fosun Int’l says its missing chairman is helping police financial probe.

Bloomberg

The sale of the Phoenix insurance unit by Yitzhak Tshuva’s Delek Group appears to be in doubt after buyer Fosun International said its chairman was aiding police in an unspecified financial investigation.

Fosun reported on Thursday that its chairman, Guo Guangchang, one of China’s best-known entrepreneurs, had gone missing and a later said Guo was assisting authorities with an investigation, after an earlier report said the group lost contact with its billionaire founder.

Representatives of Fosun will arrive in Israel in the coming days to discuss the acquisition and a timetable, Delek told the Tel Aviv Stock Exchange on Sunday. The company said it would issue further statements on any developments related to the sale process.

Trading was briefly suspended both in Delek and Phoenix in the morning, pending clarifications. When it resumed, Delek shares fell to end down 4.5% to 5.80 shekels, while Phoenix lost 3.1% to 8.48 shekels. Clal Insurance, which is also for sale and likely to be bought by another Chinese buyer, dropped 5% to 51.19 shekels

Delek agreed in June to sell its 52.3% stake in Phoenix to Fosun for 1.8 billion shekels, part of an asset sale Delek has been undertaking as it focuses on its core energy business. The deal has been waiting for the Finance Ministry to determine whether Fosun and its chairman should be granted an insurance license.

Fosun group companies have invested in Israeli pharmaceutical businesses and have reportedly expressed an interest in two small offshore gas fields – Karish and Tanin – that are partly owned by Delek.

Eking to calm its own investors, Fosun said Guo, one of China’s best-known entrepreneurs, is helping police with an investigation that mostly concerns his personal affairs, the president of Fosun said on Sunday.

“We trust Chairman Guo is a wise man and will actively cooperate and fulfill his duties to assist the investigation as soon as possible,” company president Wang Qunbin told a conference call.

“It is mostly about his personal affairs,” said Wang, when asked whether the probe was related to the company or Guo personally. Wang said he could not provide more details as the investigation was “sensitive.”

CEO Liang Xinjun said Guo was helping police in Shanghai and said he was currently assisting with an investigation and not the subject of it. He did not give further details about the nature of the probe.

Reuters’ calls to the Ministry of Public Security in Beijing seeking comment on the situation were not answered.

Guo’s sudden absence, and the lack of detailed information that the company has given about his status, underlines the opaqueness of China’s legal system. A string of senior executives at Chinese companies have temporarily gone missing this year amid a crackdown by Beijing on its financial sector.

Liang said Fosun was in communication with its lenders, investors and credit ratings agencies. He said the company was “not in crisis,” and its financial situation was “very healthy.”

The CEO said Guo was able to take part in major decisions involving the company, but also said Fosun had the management structures and business strength to withstand Guo’s absence, saying it did not rely on “any one executive.”

Liang also highlighted the company’s deep pockets, with cash and cash equivalents, alongside liquid financial assets, in excess of 60 billion yuan ($9.3 billion).

Fosun International’s shares and convertible bonds, as well as shares in companies controlled by Guo, were suspended in Hong Kong and the mainland on Friday. Fosun International shares and convertible bonds were due to resume trade on Monday.

The question of Guo’s whereabouts has already come to the attention of banking supervisors in Europe, where Fosun is in a battle to buy Anglo-German bank BHF Kleinwort Benson, people familiar with the regulatory process said on Friday.

Guo, 48, built an empire of industrial companies, alongside a host of insurance, banking and asset management firms. Earlier this year, Fosun clinched a billion-dollar takeover of the Club Med resort chain. In total, Fosun has spent more than $30 billion on foreign acquisitions and at the end of June 2015 had total assets worth $55 billion.