Pan-European Permira Funds LLC is expected to decide in principle within weeks in favor of acquiring Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), and enter into final negotiations with IDB Holding Corp. Ltd. (TASE:IDBH), but to ask for a lower price.
Market sources believe that Permira will claim, among other things, that the price tag should be reduced to take into account Ministry of Finance directives to cut management fees on provident funds. Permira is expected to submit an offer to IDB within weeks.
IDB controlling shareholder and chairman Nochi Dankner will reportedly insist on a valuation of at least $1.9 billion for Clal Insurance, and will not compromise. Even before Permira's due diligence on Clal Insurance, it had given conditional agreement to Dankner's basic terms.
Permira may demand a two-stage deal from IDB, initially paying 80% of the agreed price for Clal Insurance, and paying the balance subject to milestones and the company's future profit margins. IDB is expected to dismiss this demand out of hand.
A well-informed sources said, "This is the price that IDB is demanding. It is the threshold, beneath which it won't go. Permira knew this even before it began the due diligence. If Nochi doesn’t get the price he wants, he won't sell."
Sources inform ''Globes'' that another international investor is also interested in acquiring Clal Insurance. The party is said to be "very interested, very serious, and thoroughly knows insurance." This party has already visited the information room at IDB Development to examine Clal Insurance's figures, and has met with company executives. Sources at IDB said that this other party "has not made as much progress as Permira, but is not far behind it."
The sources said that Permira was wrong to think that IDB wants to sell Clal Insurance at any price, and that it has no alternatives. "It is always possible seek an excuse for lowering the price, but for them to think that they're alone in the negotiations is a pity."
Permira earlier asked for exclusivity in the negotiations, but IDB refused.
IDB declined to comment on the report.
Clal Insurance's share price rose 1.8% in morning trading to NIS 93.71, giving a market cap of NIS 5.29 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on March 21, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011