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Phoenix sale to Kushner near collapse

Phoenix controlling shareholder Delek Group is considering other offers.

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The chances that the sale of a controlling interest in The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) insurance group to the Kushner family will go through are small, and it appears that the deal is close to being called off altogether. A few days ago, Yitzhak Tshuva, the controlling shareholder in Delek Group Ltd. (TASE: DLEKG), which owns Phoenix, flew to New York for a series of meetings with the Kushner family aimed at moving the deal forward, among other things. As far as is known, the meetings were fruitless, and most sources believe the deal will not go through. An official decision on the matter is expected by the end of the year.

It was reported last week that the Kushner family had asked for a $975 million -$1.170 billion price discount for Phoenix (on a reported $6.63 billion price). As far as is known, the Kushner family gave a number of reasons for its request: the workers committee being formed at Phoenix, stringent regulation in the Israeli market, findings in the course of due diligence conducted for Phoenix, and the current multiple at which the Phoenix share is being traded on the TASE. Delek Group is refusing to grant such a discount.

The discount is not the only reason preventing the deal. The Kushner family wants to recruit a partner in its acquisition of Phoenix, but who this partner could be is still unclear. The potential partner is believed to be an investment fund, but the Kushner family realizes that there is little chance of Supervisor of Capital Markets, Insurance, and Savings Dorit Salinger issuing a permit for control of an insurance company to an investment fund, just as she refused to issue such a permit for Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS). Furthermore, the Kushner family itself was recently required to provide additional particulars to the Supervisor for the purpose of obtaining a permit.

Delek Group is under no financial pressure to make the sale, given its huge cash balances accumulated as a result of the successful sale of holdings over the past year and the alternatives at its disposal for the sale of Phoenix, which are already under consideration. The Kushner family’s exclusive right to buy Phoenix expired a month ago, enabling Delek Group to examine other offers.

It must be sold, but not necessarily now

Delek Group is being forced to sell Phoenix because constraints under the Concentration Law, which bars simultaneous financial and non-financial holdings by a corporation. At the same time, the group still has quite a few years to complete such a deal.

Delek Group and the Kushner family, led by Jared Kushner, signed a non-binding letter of understanding in early July for the sale of a 47% controlling interest in Phoenix according to the value of its equity, plus 5% annual interest up until the date on which the deal is completed.

The exclusivity period agreed on by the parties has since expired. As of the end of the third quarter, Phoenix’s equity had risen by 5%.

 

Published by Globes [online], Israel business news – www.globes-online.com

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