Delek in Pact to Sell Insurer Phoenix to China’s Fujian Yango

Agreement is fourth attempt by holding company to divest its 52.3% stake and will likely face tough regulatory scrutiny

Eliran Avtial

Delek Group said Monday that it had signed a binding agreement to sell its controlling 52.3% stake in Phoenix, Israel’s third-largest insurance company, to China’s Fujian Yango Group for 1.95 billion shekels ($515.9 million) in cash. It was Delek’s third attempt to sell the insurer.

The agreement represented a slight improvement on the 1.85 billion shekels that Fujian Yango, a holding company, had agreed to pay at the start of July, when the two sides reached a preliminary agreement.

The latest offer valued Phoenix at 3.7 billion shekels, a premium of more than 60% on its Tel Aviv Stock Exchange market valuation on Sunday. Phoenix shares climbed 4.5% to close at 9.63 shekels. Shares of Delek Group ended up 0.7% at 802.10 shekels.

Eyal Dabby, head of equity research at Bank Leumi Investors, cautioned that the sale might not be approved by Dorit Salinger, the treasury commissioner for capital market, insurance and savings. In recent years, six Chinese companies have made bids for Israeli insurers Phoenix and Clal, which is also up for sale, but none have received the required license.

Lamwkers responded negatively to news of the deal, with Zahava Galon calling for the Knesset Finance Committee to hold an urgent meeting over concerns about the management Israeli savings being controlled by a foreign company. “Selling Pheoenix will make 160 billion shekels of the public’s pension money exterritorial from a regulatory viewpoint and the implications could be catastrophic,” she said.

Meanwhile, the insurance industry is facing a tougher regulatory environment that has seen profits fall because of record low interest rates.

“Even if [the offer] is approved, the company’s market value will be lower than the purchase price, as investors think that fierce regulation hasn’t come to an end and the Chinese buyer is not fully aware of the impact it is expected to have,” Leumi’s Dabby said in an e-mail.

Delek Group, which is controlled by Yitzhak Tshuva, has no choice but to divest its Phoenix holding. The company wants to concentrate on its energy business, the centerpiece of which is holdings in theTamar and Leviathan natural gas fields, and has been offloading other businesses.

In addition, the 2013 Business Concentration Law requires holding groups like Delek to sell their financial holdings within six years.

The agreement with Fujian Yango marks the fourth attempt by Delek to divest Phoenix. In March, a nonbinding agreement to sell the insurance company to a United States insurer, which industry sources identified as AmTrust Financial Services, was canceled by mutual agreement.

Before that, Delek had agreed to sell the Phoenix stake to another Chinese company, Fosun International, for 1.8 billion shekels. That deal collapsed after Fosun’s founder and chairman mysteriously disappeared and regulators signaled they would not approve the acquisition.

In 2014, Delek tried to reach agreement with the Kushner group, which is led by Donald’s Trump’s son-in-law and adviser, but those negotiations collapsed at the end of that year.

Fujian Yango, which is traded on the Shenzhen Stock Exchange, was formed in 1995 by Lin Tengjao and has subsidiaries that operate in real estate, private education, medical electronics, international trade and finance, inlcuding insurance.