Sales of Two of Israel’s Biggest Insurers Advance

Purchase of Phoenix by China’s Fosun in final stretch while bidders for Clal get first access to proprietary financial data.

Bloomberg

Clal Insurance and Phoenix - two of Israel’s biggest insurers - are moving closer to be sold to overseas buyers in deals that could reach as much as 4.1 billion shekels ($1.06 billion) and put a big part of the industry in Chinese hands.

Negotiations to sell a 52% stake in Phoenix by the Delek Group to China’s Fosun Group are entering their final stage, with the two sides likely to sign a binding agreement by the end of the week, TheMarker has learned.

Under the terms, Phoenix will be sold at a valuation of 3.3 billion shekels, or a 21% premium over its Tel Aviv Stock Exchange market capitalization. That would bring Yitzhak Tshuva’s Delek some 1.73 billion and mark the biggest divestment yet as he seeks to focus the group on its energy holdings, mainly the Tamar and Leviathan gas fields.

Nevertheless, the valuation is lower than the one that appears in a memorandum of understanding signed in January with Focus, a Chinese investment company, which valued Phoenix at about 3.7 billion shekels.

Since January, however, Delek has agreed to cut 200 million shekels from the valuation after Fosun completed its due diligence and an investigation now under way into allegations that employees of Phoenix’s financial services unit, Excellence, allegedly manipulated share price.

Meanwhile, the sale of a 55% stake by IDB Development Corporation took a key step forward on Sunday when it opened its data room to four perspective bidders, where they can see proprietary information on the company before preparing a bid.

The four are all overseas companies. One is CVC Capital Partners, a London-based private equity fund with $70 billion under management and the second is New York’s Warburg Pincus, a private equity fund that manages $35 billion in assets.

Two of the other potential buyers are Chinese – Xio, a Hong Kong-based investment company, and JT Capital, headed by Hong Kong-based businessman Li Haifeng. A group led by JT earlier made a bid for Clal but pulled out a year ago when Dorit Selinger, the commissioner for capital markets, insurance and savings, refused to grant it an insurance license. JT is re-entering the context with a restructured bid.

AmTrust Financial Services, a New York-based property and casualty insurance company, is expected to join them next week and others may as well, sources said.

Eduardo Elsztain, IDB’s controlling shareholder, is not enthusiastic about selling Clal Insurance, even though his debt-laden holding group could use the cash it will generate. He is seeking to sell the insurer at a 4.3 billion-shekel valuation, a 24% premium on its TASE market capitalization. That would bring IDB some 2.36 bilion shekels in cash.

Since Izzy Cohen took over as CEO two-and-a-half years ago he has worked to improve the company’s financial performance, replacing top managers, selling and closing money-losing operations, and suspending dividends. Nevertheless, Clal has been struggling because of low interest rates, with profit dropping 38% last year to 362 million shekels.