Foreign Investors to Acquire Majority Stake in Tel Aviv Stock Exchange

Four investors from Australia, U.S. and Denmark will join U.S. hedge fund Manikay Partners in helping make the Tel Aviv Stock Exchange a publicly traded company

Yasmin Gueta
Jasmin Gueta
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File photo: Visitors stand in front of a stock market ticker screen in the lobby of the Tel Aviv Stock Exchange (TASE) on August 4, 2016.
File photo: Visitors stand in front of a stock market ticker screen in the lobby of the Tel Aviv Stock Exchange (TASE) on August 4, 2016. Credit: Bloomberg
Yasmin Gueta
Jasmin Gueta

The Israeli Securities Authority approved the sale of a majority stake in the Tel Aviv Stock Exchange to a group of foreign investors in a step that removes control of the bourse from its members, putting it on the road to becoming a publicly traded company.

The approval comes four months after the TASE reached an agreement to sell a majority stake to the U.S.-based hedge fund Manikay Partners and a group of then unnamed overseas investors.

In announcing its approval on Sunday, the ISA also revealed the names of the four investors – down from an original five after one dropped out – in addition to Manikay. They are:

Sunsuper Pty, a Queensland, Australia-based pension fund that oversees 55 billion Australian dollars ($40.3 billion).

Moelis Australia Asset Management, a second Australian company that specializes in alternative investments, including real estate, infrastructure, and public and private equity

Dalton Investments, a California firm registered with the U.S. Securities and Exchange Commission, that invests in, among other things, hedged equity, distressed debt and emerging market debt.

Novo Nordisk Foundation, a Danish philanthropic foundation focusing on medical treatment and research and he primary owner of the drug company Novo Nordisk.

All told, the four overseas investors will own 51.7% of the TASE, although of that 32.9% will be held by a trustee, Moshe Tery. Manikay will have another 19.99%.

Individually, the four investors’ direct holdings in the stock exchange will come to 4.69% each.

The result will be that the banks and investment houses that have traditionally controlled the bourse will see their stake drop to 22.3% and the remaining 6% held in trust for TASE employees.

The ISA said that a 31.7% stake – nearly all the shares held by Tery as trustee – would be sold through an initial public offering that would be held sometime “in the future.”

“The permits issued [Sunday] by the ISA allow the TASE to embark on a new path as a competitive, progressive business entity, in line with all countries in the Western world,” said ISA Chairwoman Anat Guetta.

“The TASE’s main function is to support the development of Israel’s economy. The former ownership structure prevented it from optimally fulfilling its function,” she said.

The approvals marks a major step forward for the restructuring process that TASE has been undergoing, aimed at making it competitive globally and more efficient.

The bourse has lost about 200 listings over the past decade while trading volumes slumped to an average of 1.36 billion shekels a day in the first seven months of this year from 2 billion shekels in 2010.

As part of the restructuring, the TASE was demutualized almost a year ago and became a for-profit corporation. Earlier this year, its existing shareholders – who had previously been member banks – agreed to sell 71.7% of their shares at a 500 million shekel valuation, the maximum allowed under the law.

The April deal with Manikay put a value of 551 million shekels on the stock exchange.

Manikay, a U.S. hedge fund with operations in London and Sydney, has been involved in a number of securities exchange-related transactions, including with the New York Stock Exchange, Chicago Board of Trade and the Sydney Future Exchange.

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