The Tel Aviv Stock Exchange has agreed to sell a majority stake in itself to a group of foreign investors as it seeks to breathe new life into an institution that has suffered years of declining trading volumes and delistings.
The TASE said late on Monday that the U.S.-based hedge fund Manikay Partners will buy 19.9% of the TASE in a deal valuing the bourse at 551 million shekels ($156 million).
Another 51.8% will be sold to a group of unnamed foreign investors. However, of that, stock amounting to 30% of the TASE’s total equity will be held in trust and sold in an initial public offering of TASE shares slated for the fourth quarter of this year, it said.
“We believe the entry of international investment groups ... combined with a significant share held by the public is the most appropriate structure for the local stock exchange and one that would support its continued development and growth,” TASE CEO Ittai Ben-Zeev said in a statement.
The TASE has been undergoing a wide-ranging restructuring aimed at making it competitive globally and more efficient. The bourse has lost about 200 listings over the past decade while trading volumes have slumped to an average of 1.4 billion shekels a day last year from 2 billion shekels in 2010.
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As part of the process, the TASE was demutualized last September and became a for-profit corporation. Three months ago, 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.
Ben-Zeev told Reuters at the time that the TASE was expected to sell a controlling stake to an overseas stock exchange and that more than 10 exchanges had shown interest.
However, bourse sources said this week that management came to the conclusion that selling a stake to a leading foreign stock exchange was not critical for building a cooperative agreements and that it might even present obstacles.
In addition, other sources said, the bitter experience Nasdaq employees had in trying to set up a joint trading platform with the TASE two years ago may have played a role. The Nasdaq team was greeted by a mass protest by the TASE workers’ committee, worried that cooperation would cost them jobs.
Manikay, a U.S. hedge fund with operations in London and Sydney, has been involved in a number of exchange-related transactions, including with the New York Stock Exchange, Chicago Board of Trade and the Sydney Futures Exchange.
“We intend to make our experience available to them, both to help progress their IPO and to compete in the global exchange industry,” Shane Finemore, a Manikay founding partner, told Bloomberg News. He described the investment as a “long-term strategic partnership.”
The IPO in TASE shares will be sold directly to the public without the involvement of institutional investors, the bourse said. “The Israeli public is entitled to benefit from the growth and success of the Israeli economy. TASE is the most suitable platform for sharing this success with the public,” Ben-Zeev said.
If all goes according to plan, by the end of the year, the public will hold 30% of the TASE, its veteran shareholders 22.3%, the foreign investors 21.8%, Manikay 19.9% and TASE employees 6%, the bourse said.