The investigation at Psagot could not have come at a worse time for the company. Only recently was the deal signed for the sale of the investment house at the high (some would say too high) value of NIS 3.1 billion to the Apax fund, managed by Zehavit Cohen.
When the investigation of suspicions of securities pegging in Psagot's nostro department first became public knowledge, it was thought that, whatever the outcome, it would not lead to the cancellation of the deal. Apax agreed to buy 74% of Psagot from the York Capital Management, Seneca Capital, and Plainfield Asset Management funds, at the value, as mentioned, of NIS 3.1 billion.
The sale price reflects the strength of the Psagot brand and the total of assets under management in its various arms. It apparently derives from the investment house's operating profit or cash flow. So far, the investigation has not damaged Psagot's reputation very much, mainly thanks to field work by Psagot's people among investment advisers and clients. The questioning under caution of its top managers could have a significant effect on the market.
If Psagot's reputation does suffer damage, leading to large redemptions and a direct effect on its financial results, Cohen will be likely to demand that York should adjust the price to suit Psagot's new situation.
At this stage, Apax's managers are continuing to monitor events, and are not responding to questions on the matter.
Published by Globes [online], Israel business news - www.globes-online.com - on March 18, 2010