Tel Aviv Stock Exchange Expects Sale of Control to Large Foreign Bourse by April

TASE offering 71.7% holding being bought back from bank members

A large digital ticker shows financial information to pedestrians outside the entrance to the Tel Aviv Stock Exchange (TASE) in Tel Aviv, Israel, on Thursday, Aug. 4, 2016.
Rina Castelnuovo, Bloomberg

The Tel Aviv Stock Exchange expects to have a deal in place by April to sell a controlling stake to a large foreign bourse, CEO Ittai Ben-Zeev said Monday.

Ben-Zeev would not disclose which exchange was the likely buyer but said TASE had been in talks with more than one major overseas exchange operator.

TASE, which was demutualized to become a for-profit entity in September, plans an initial pubic offering some time next year. To that end, it has offered to buy out the shares held by the commercial and investment banks that are now its members at a price that values the bourse at 500 million shekels ($145 million).

Ben-Zeev said TASE has commitments from the banks to buy back 71.7% of their shares, and TASE has until April 18 to accept.

“That stake will be sold to a strategic partner — a large foreign exchange,” Ben-Zeev told reporters. “I believe that we will have for sure” a deal with an exchange by mid-April,” he added without elaborating.

Member banks would retain a 22% stake while TASE employees own another 6%.

The Tel Aviv exchange aims to become competitive, cheaper and more efficient after seeing around 200 delistings over the past decade and trading volumes slump. In 2017 stock trading averaged 1.4 billion shekels, or about $408 million, a day, up slightly from 2016 on a rise in initial public offerings but well below 2 billion shekels in 2010.

Ben-Zeev said he expects volumes to reach 2 billion shekels a day in two years with a longer-term goal to reach $1 billion a day.

He noted that the TASE was working to be more visible globally and be included in more MSCI and FTSE indices.

At the same time, the bourse is trying to lure many of the 90 Israeli companies listed abroad — with a combined market value of $70 billion — to dual-list in Tel Aviv. One barrier for companies listed on Nasdaq to trade in Tel Aviv has been removed, with companies allowed to be advised by International Shareholder Services instead of Entropy in Israel.

The Israeli government’s plan to privatize 10 to 15 state-owned companies with an estimated float of $4.3 billion should also boost the bourse’s trading volumes in the next few years. Among them, the government is expected to float a 20% stake in Israel Post on TASE later this year.

Ben-Zeev, a proponent of lower capital-gains taxes, said the bourse also aims to encourage dozens of high-tech companies to list each year rather than turning to venture capital or private equity funds for financing.