An investment group headed by the Jewish son-in-law of New York real estate magnate Donald Trump has agreed to buy control of the Israeli insurer Phoenix Holdings, at a price of 1.7 billion shekels ($497 million).
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Delek Group, the holding company that controls Phoenix, said yesterday it had signed a memorandum of understanding to sell its 47% stake in the insurance company to New York-based Kushner Group, headed by Jared Kushner, the husband of Trump’s daughter Ivanka.
“We have confidence in the Israeli economy and its growth potential,” said Kushner, who is not known to have invested in Israel before. “Israel’s economy is open, transparent and competitive.”
The sale values the company at 3.62 billion shekels, meaning Kushner paid a 16% premium over Phoenix’s Tel Aviv Stock Exchange market capitalization. But Meir Slater, head of research at Bank of Jerusalem, told Bloomberg News that the valuation was a relatively low 0.94 to book for a controlling stake.
Shares of Phoenix, Israel’s fourth-biggest insurer by market capitalization, rose as much as 3.4% on the news before falling back to a close of 12.80 shekels, a gain of 1.7% for the day. Delek stock fell 0.9% to close at 1,397 shekels.
Terence Klingman, an analyst at Psagot Investment House, in a report released yesterday, said Phoenix was the most profitable of Israel’s insurance companies and had the best operating performance. Nevertheless, he rated it a Market Outperfom rather than a Buy because its shares trade at a relatively low discount to net asset value.
The Kushner Group has interests in real estate, insurance, media and banking. Most prominently, the group has owned Observer Media, which publishes the influential weekly newspaper and website The New York Observer since 2006. Jared Kushner bought it when he was 25 and has been credited with successfully expanding its business. Two years later, he took over as CEO of Kushner Group from his father, Charles, several years after the elder Kushner was convicted in federal court for making illegal campaign contributions, tax evasion and witness tampering.
The Phoenix sale quickly prompted criticism from at least one Knesset member. Zahava Gal-On, chairwoman of Meretz, questioned why the company was being sold to a new controlling shareholder rather than to the public through a general share offering. In a statement echoing the criticisms of the IDB group’s attempt to sell a controlling stake in Clal Insurance to a Chinese investor group, Gal-On expressed concern that the pension and other savings managed by Phoenix would now be in foreign hands.
“How will the insurance commissioner [Dorit Salinger] ensure that the money of policyholders won’t be misused?” she demanded. “There’s a real fear that the public’s money, estimated at more than 50 billion shekels, will be abandoned or transferred to foreign control for a mere 1.7 billion shekels.”
In other news, Tshuva’s Delek Group has been divesting assets in a drive to raise cash to finance its portion of the cost of developing the giant Leviathan natural gas field offshore Israel. Delek, whose operations span from energy to real estate to finance, sold its Delek Europe unit last month for 1.7 billion shekels, a 36% stake in the U.S. insurer Republic Companies for $80 million, the investment group Barak Capital for 237 million shekels and has been gradually selling off stock in its Delek USA unit, in which it holds just 7.5% today.
In addition, Delek faces a deadline to divest its financial holdings to meet the terms of the Business Concentration Law approved by the Knesset at the end of last year.
The agreement to buy Phoenix is non-binding and subject to due diligence as well as the signing of a binding accord, which will require regulatory approval, Delek said.