U.K. Private Equity Fund XIO to Buy Israel's Meitav Dash in Deal Valued at $386 Million

The deal would put Israel’s two biggest investment houses under the hood of foreign investors.

Zvi Stepak, left, and Eli Barkat of Meitav Dash.
Eyal Toueg

The London-based private equity fund XIO Group agreed Thursday to buy Meitav Dash, Israel’s second-largest investment house, in a deal valued at 1.48 billion shekels ($386 million).

The sale still must still be approved by Meitav Dash shareholders and the Finance Ministry’s Capital Markets, Insurance and Savings Division, but if it goes through Israel’s two biggest investment houses will be controlled by foreign private equity funds. Psagot was acquired by Britain’s Apax fund in 2009.

Formed in 2013 by the merger of two veteran investment houses, Meitav Dash manages about 122 billion shekels in assets and employs some 800 people. Under the terms of the acquisition, the firm’s top officers – CEO Ilan Raviv, chairman and founder Zvi Stepak and his son Avner Stepak – must stay on as managers.

Meitav Dash’s Tel Aviv-traded shares had risen 40% this year before the deal was announced, and XIO will offer shareholder two options: stock sale at a cost of 22 shekel (compared with the price of 13.67 shekel at the end of trading the day before the deal was announced) or an alternative of 13.7 shekels per share now and a debenture of 13.17 to be paid over three years - those payments may be rejected and shrink depending on compliance to certain conditions.

The stock soared more than 26% on Thursday’s news to close at 17.27 shekels.

“We believe that the deal is a significant expression of confidence in Meitav Dash’s strategy and achievements, and also in its employees,” Zvi Stepak said in a statement. “I believe that it's an excellent deal for the shareholders, our clients and the staff. Our clients will benefit from our being part of a leading global financial organization that joins with the knowledge and experience of [Meitav Dash’s] management.”

XIO is a global fund formed in 2014 by four partners – two of them Chinese and two of them European – and manages $5 billion in assets from offices in London, Hong Kong and Shanghai. Before Meitav Dash, its last acquisition was of U.S. business research firm J.D. Powers from McGraw Hill Financial for $1.1 billion in April.

Meitav Dash won’t be XIO’s first foray into Israel; last year it bought the medical-device maker Lumenis for $510 million.

XIO’s expertise is to buy companies in North America and Europe and help them expand in fast-growing markets in Asia, XIO Chief Executive Joseph Pacini said in an interview at the time. He said XIO’s backers were a “diversified set of institutional investors.”

On Thursday, he called the acquisition of Meitav Dash “an ideal fit for XIO’s strategy.”

The Israeli firm said in August it had received an offer from an unidentified buyer, and word quickly leaked out that it was XIO. “We received an offer from this international fund a few months ago and even though we weren’t interested in a sale the offer was good enough that we thought we should examine it,” Raviv told Reuters on Thursday.

Under the terms of the offer, Meitav Dash shareholders can take 22 shekels a share in cash now or 13.70 shekels a share in cash now and 13.70 shekels over three years in the form of a bond.

Meitav Dash’s controlling shareholders are the BRM investment fund and Zvi Stepak, with 30% and 29% stakes respectively. The investment firm’s 800 employees have options worth as much as 100 million shekels.

If the sale goes through, Meitav Dash shares will be delisted from the Tel Aviv Stock Exchange, but its bonds will continue trading until they mature in 2025.