Delek Signs Binding Pact to Sell Insurer Phoenix

U.S. private equity funds Centerbridge, Gallatin will pay NIS 1.72 billion for controlling 32% stake

Billionaire Yitzhak Tshuva, who controls the holding group Delek.
Dudu Bachar

Delek Group signed a binding agreement on Thursday to sell control of its Phoenix Holdings insurance unit to the U.S. private equity firms Centerbridge Partners and Gallatin Point Capital at a company valuation of 5.3 billion shekels ($1.47 billion).

The agreement caps several years of unsuccessful efforts by Delek, a holding group controlled by billionaire Yitzhak Tshuva, to sell Phoenix. It was frustrated by Israeli insurance regulators, who wouldn’t grant an insurance license to the Chinese groups interested in buying the company.

Under the agreement, the two funds will pay 1.6 billion shekels, or 20.60 shekels a share, for a controlling 30% stake, as was agreed upon in a non-binding deal announced in February. In addition, Delek said it would arrange for the buyers to purchase another 2.5% of Phoenix for 120 million shekels.

Phoenix shares were 1.6% lower on the Tel Aviv Stock Exchange at 22.89 shekels in late trading. Delek was down 0.7% at 64,120 shekels.

The final amount could include up to 860 million shekels or a reduction of as much as 200 million from the 1.72 billion shekel total, depending on Phoenix’s business performance over the next five years. 

Delek faced a government deadline to divest from Phoenix due to a new law that prohibits conglomerates from controlling stakes in both financial and non-financial businesses. But Delek wanted to divest the insurance company anyway. Once a wide ranging holding group, Tshuva has shifted its focus to energy, including stakes in Israeli natural gas fields and assets abroad.

Financing for the deal will come from three different sources: some 800 million shekels from the funds themselves, 580 million from an Israeli loan syndicate led by Mizrahi Tefahot Bank and 200 million as a loan from Delek itself.

The sale is subject to approval by Israel’s Capital Markets, Insurance and Saving Authority, which is headed by Moshe Bareket, a former Phoenix chairman.

Centerbridge was founded in 2005 by Jeffrey Aronson and Mark Gallogly and has about $35 billion in assets invested in financial services, consumer companies and real estate, among other sectors. Gallatin, founded by Matthew Botein and Lee Sachs, invests in financial institutions, services and assets.