Markstone Capital Partners Group LLC) is breaking up Prisma Investment House Ltd. and is in talks to sell its units to various parties. Markstone, run by managing directors Ron Lubash and Amir Kess, is in advanced negotiations to sell Prisma's provident funds to Psagot Investment House Ltd., and is also in talks with several investment houses to establish a new investment house that will consolidate and manage investment portfolios and short-term assets, including mutual funds and exchange-traded funds (ETFs). This new company will also take over Prisma's Tel Aviv Stock Exchange (TASE) membership.
The most serious talks about the new company are with Meitav Group and Gaon Capital Markets Ltd. Other names are also include Altshuler Shaham Ltd., Epsilon Investment House Ltd., Tamir Fishman & Co., and Yelin Lapidot Ltd.
A capital market source said, "There was no company in the market that Markstone did not contact in the past month about cooperation."
Every scenario includes mass layoffs at Prisma, which some sources say could reach 100 to 150 employees, as well as the departure of senior managers.
A source at Markstone said that the standing of Prisma CEO Yuval Gavish was not at risk under any circumstances. "Gavish will continue to be a prominent figure at Prisma in the future," he said.
A deal with Psagot will probably take the following shape: Prisma will sell its provident funds, which have NIS 20 billion in assets under management, to Psagot, which has about the same amount of assets, in exchange for a 23-25% stake in Psagot and a small amount of cash. Psagot's company value for a deal is estimated at NIS 2.2 billion, after money. Psagot will not assume Prisma's bank debt, which will be repaid from dividends distributed by Psagot.
A source close to the deal said, "This is a problematic structure, which leaves the risk in Lubash's court."
If a deal is closed, Psagot, which manages Israel's largest provident fund, Gadish, will have NIS 40 billion in assets under management in provident funds.
As for the consolidated mutual fund management company, Lubash wants to create a company comprising units of Prisma, Meitav, and Gaon Capital Markets, which will have NIS 25 billion in assets under management. Prisma will have 45% of the shares of the new company, Meitav 25%, and Gaon Capital Markets 15%.
Prisma's mutual funds have NIS 10 billion in assets under management, Meitav has NIS 1.7 billion, and Gaon Capital Markets has NIS 1.5 billion. The ETFs of Gaon Capital Markets and Prisma have an aggregate NIS 3 billion in assets under management. The new company would also include the provident funds of Meitav and Gaon Capital Markets, Prisma and Gaon Capital Markets' TASE memberships, and the companies' investment portfolio management business.
The new company will likely bear the Meitav brand, which is the strongest of the three, although it will initially be jointly branded with Prisma.
A major headache for Markstone is Prisma's NIS 1 billion bank debt, and how to share it with the new shareholders. Any settlement will require the consent of the lender banks: Bank Hapoalim (TASE: POLI; LSE:80OA), Bank Leumi (TASE: LUMI), and Israel Discount Bank (TASE: DSCT).
In response to the media reports, Gaon Capital Markets' parent B. Gaon Holdings Ltd. (TASE: GAON) issued a notice to the Tel Aviv Stock Exchange (TASE) confirming the merger negotiations. It added that the talks "were preliminary" and that there was no certainty that they would result in a binding agreement.
Published by Globes [online], Israel business news - www.globes-online.com - on December 21, 2008
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