"Yes I'm glad," Shlomo Eliahu told acquaintances today in his office in Tel Aviv's Eliahu Tower."It's true that I had to summon strength and take a decision to back down from Bank Leumi, the dream of my life, but I do this gladly, and I'm returning to my roots and the place where my expertise lies and that I most understand. I'm buying the largest, most stable and best managed insurance company."
Eliahu, the owner of Eliahu Insurance Ltd., was speaking today after news broke that he was buying the 69.13% stake of Italy's Assicurazioni Generali SpA (BIT: GASI) in Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL). He has reportedly acquired control of Migdal for NIS 4.2 billion, reflecting a company value of NIS 6 billion, a 13% premium on its market cap of NIS 5.4 billion.
Immediately after the regulators have their say and approve the deal, Eliahu will return to routine and intensive work in the field that he knows best: insurance. Those familiar with Eliahu's business and insurance track record know that a short time after control and management of Migdal have passed into his hands the entire insurance market will look and behave differently, or in today's parlance a huge consumer revolution. It was Avner who brought about the Avner insurance cartel for compulsory vehicle insurance. The result was a new world of true competition and a steep fall in prices.
Meanwhile, Eliahu must wait for Generali's signature and approval from the Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig, Antitrust Authority director general Prof. David Gilo, and Supervisor of Banks Dudu Zaken. The deal, put together over the past two weeks, and signed today by Shlomo Eliahu, will be implemented by his private holding company. The money too, 15% of the deal, was deposited with trustees today from the private accounts of Eliahu. After discussions with the regulators a decision will be taken together with them on exactly how Eliahu's investment in Migdal will be held.
The Supervisor of Capital Markets, Insurance and Savings will not allow Eliahu to own two insurance companies - Eliahu Insurance and Migdal. Therefore, Eliahu will have to make what will be a tough decision for him and part with the company he set up and created his wealth. Furthermore, according to the instructions of the Bachar Commission, Eliahu will not be permitted to own both a large insurance and finance company, and a large bank. He will be required to re-order his holdings and it is clear what he will do. He will sell his stakes in Union Bank of Israel (TASE: UNON) and Bank Leumi (TASE: LUMI). From precedents, it is safe to assume that the regulators will give him time to buy Migdal and then reorganize his business. His shares in Union Bank and Bank Leumi will be transferred to a trustee or place in to a situation of "dormant rights."
In addition, in coordination with the regulator, Eliahu will formulate a position on whether he will independently own Migdal or bring in a partner. In the past Eliahu has been in talks with various groups, including foreigners, on forming a controlling core for Bank Leumi. Such groups of reinsurers could join Eliahu at Migdal over time.
In a statement today Eliahu said, "I am aware that I will need to reach understandings with the Supervisor of the Capital Market, Insurance and Savings regarding the continuation of the activities of Eilahu Insurance Ltd. as well as my holdings in Bank Leumi and Union Bank. In order to receive a license for control of Migdal, the largest insurance company in Israel. This is an exciting moment for me and for my family. The deal will be completed with receipt of the required approvals from the Supervisor of the Capital Market, Insurance and Savings."
Published by Globes, Israel business news - www.globes-online.com - on March 7, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012