Migdal Insurance is getting set to raise as much as NIS 1 billion in a public bond issue, according to market sources, just a fortnight after insurance magnate Shlomo Eliahu bought control of the company from Italy’s Assicurazioni Generali for NIS 3.55 billion.
Sources say they believe part of the proceeds will be used to pay a large dividend, with Eliahu reaping hundreds of millions of shekels in cash on his 69.5% stake in the company.
Migdal has about NIS 500 million in bonds placed with institutionals, along with a relatively low overall debt of NIS 1.5 billion to banks and for other payables, against over NIS 1.3 billion in cash resources.
In the first nine months the company posted NIS 260 million in net income, a figure that would have been much higher had it not set aside, at the request of the treasury, NIS 180 million in pretax earnings to cover a revised projection pointing to longer life expectancies. Migdal paid a NIS 150 million dividend in March.
Eliahu, whose personal wealth is estimated at NIS 4.5 billion, put up NIS 1.2 billion of his own capital to buy his stake in Migdal, borrowing NIS 2 billion from Bank Leumi in exchange for personal guarantees and liens on some of his Migdal shares and personal assets. A NIS 350 million loan from Israel Discount Bank gave Eliahu the balance.
liahu remains Leumi’s largest shareholder, with an 8.5% stake valued at about NIS 1.5 billion on the market after cashing in NIS 200 million in shares, but he committted not to sell any more of the stock over the next three months. Eliahu also owns 27% of Union Bank of Israel, with a market valuation of NIS 250 million.
The Bank of Israel allowed Eliahu to keep his bank shares under trusteeship for up to four years. Eliahu is expected to sell the general insurance portfolio of his closely held Eliahu Insurance Company to Migdal shortly for as much as NIS 1 billion. He recently sold the company’s life insurance portfolio to Harel Insurance for NIS 261 million.
Migdal’s bond issue will be one of this year’s largest in Tel Aviv, coming at a time when the primary market seems to be picking up steam. Over the past two weeks nearly NIS 1 billion has been raised through bond issues, with a NIS 540 million offering by Shikun & Binui leading the pack.
Migdal declined to comment.