Thai Group Pulling Out of Offer to Buy Clal Insurance

Conglomerate’s withdrawal could strike critical blow to Nochi Dankner, who needs the proceeds to protect IDB group.

A Thai conglomerate has decided to pull out of a NIS 1.4 billion offer to buy control of Nochi Dankner's Clal Insurance.

The decision by CP Group, controlled by Dhanin Chearavanont, coming just a week before Dankner faces a court-imposed deadline to sell Clal, was taken out of concern that it would not be able to get approval for the Finance Ministry's capital markets, insurance and long-term savings commissioner, Oded Sarig, to take control of the company, sources who asked not to be identified said.

The approval would have required a wide-ranging examination of CP's global operations, which include agribusiness and food, retail and distribution, and telecommunications. In addition, it appears CP has reconsidered the valuation for Clal and finds it excessive.

If the Thai conglomerate does pull out, it will strike a critical blow to Dannker, who has been counting on the proceeds of the sale to provide badly needed cash to repay his IDB group's debt. Without the cash, he will have a hard time keep bondholders from seizing control over IDB by swapping the debt they hold for an equity stake.

Under the agreement announced two weeks ago, Dankner's IDB Development Corporation was supposed to sell to CP, formally known as the Charoen Pokphand Group, a controlling 30% stake in Clal that values the company at NIS 4.6 billion. CP was also supposed to be entitled to an option to buy another 25%.

Shares of Clal Insurance fell 1.1% on the TASE Tuesday to NIS 65.60, reducing the company's market cap to NIS 3.69 billion. Shares of IDB Holding were virtually unchanged at NIS 5.52. The TASE closed before TheMarker report came out late Tuesday.

It is not clear whether other co-investors that were supposed to join CP in the acquisition have dropped out as well. Li Haifeng, who was supposed to be a junior partner in the investment consortium, is apparently still interested in pursuing Clal and is exploring new potential partners. In any case, it is doubtful that Dankner will be able to reach a second agreement at the same valuation as he did with CP.

Danker is seeking to raise capital by recruiting investors to put money directly into IDB, but he is concerned that the bondholders will seek to strike a deal with those investors, thereby cutting him out.

Tel Aviv District Court Judge Ilan Orenstein has given IDB until August 22 to sell at least half its 55% stake in Clal.

Noam Sharon, who represents the investors holding bonds in Dankner's IDB Holding Corporation, discovered that Dankner had signed with a group of New York investors, led by accountant David Waldler, a non-compete clause. That would bar them from holding talks with the bondholders.

On Tuesday, IDB Holding bondholders approved in a vote a proposal to take control of the company, thereby giving them control of its IDB Development subsidiary. The proposal, which was supported by a wide margin, means IDB Holding bondholders rejected a counter-proposal to share control of the two companies with IDB Development bondholders.

Reuters