Meitav Dash Sale to XIO in Jeopardy Due to Approval Delays

Investment house warns London-based fund it is in breach of contract in $410 million deal

Mixed denomination Shekel currency banknotes and coins sit on display in this arranged photograph at Israel's central bank in Jerusalem, Israel, on Monday, Aug. 19, 2013.
Ariel Jerozolimski, Bloomberg

The 1.48 billion shekel ($410 million) sale of Meitav Dash, Israel’s second-largest investment house, seemed in jeopardy Thursday after Meitav Dash warned buyer XIO Group that it was in breach of their agreement.

The London-based private equity fund agreed in December to buy Meitav Dash but has yet to seek approval from Israel’s Capital Markets Authority. That prompted a warning from Meitav Dash this month.

“The company notified the XIO Group of the breach of the merger agreement with regard to obtaining the approvals and its commitment to cooperate with Meitav Dash to make all reasonable efforts to promote the merger,”Meitav Dash said in a letter to XIO released to the Tel Aviv Stock Exchange.

Formed in 2013 by the merger of two investment houses, Meitav Dash manages some 122 billion shekels in assets and has a staff of 800.

XIO has 20 business days to file for approval or risk the deal being canceled. The contract does not entitle Meitav Dash to penalties, but it could sue for costs. Meitav Dash shares ended up 3% at 14.60 shekels on Thursday.

A source close to XIO, which is backed by Chinese and European capital, told TheMarker the fund was not backing away from the acquisition.

“The group is disappointed that Meitav Dash has lost patience, but we remain optimistic and are doing everything to ... complete the regulatory process with the aim of completing the sale within the timeframe,” he said.

In related news, IDB Development Corporation — the holding company controlled by Argentinean investor Eduardo Elsztain — is expect ed to sell 5% of its Clal Insurance unit in an off-the-floor sale to financier Yossi Arad.

While the sale is a modest 150 million shekels and IDB will retain 50% of Clal, it will allow Elsztain to avoid selling the shares in the stock market, where the excess supply would depress their price.

IDB is under a Capital Markets Authority order to sell Clal shares because it no longer qualifies for an insurance license, but Elsztain has resisted in hopes of finding a strategic buyer who would value Clal at more than a sale to the public would.

The deal with Arad values Clal at 3 billion shekels, about 10% below its market capitalization, and buys Elsztain time to find a buyer. Clal shares ended 3% up at 58.80 shekels on the TASE.