The sales of The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) are becoming more remote, and not only because there are apparently no buyers. An examination by "Globes" found that the bleak conditions in the financial markets have put another major obstacle in the way of the two companies sale by their owners, as required by the recommendations of the Committee on Concentration in the Economy.
The controlling shareholders - Yitzhak Tshuva's Delek Group Ltd. (TASE: DLEKG) in the case of Phoenix, and Nochi Dankner's IDB Holding Corp. Ltd. (TASE:IDBH) in the case of Clal Insurance - have six years to fulfill the committee's recommendations and sell either their financial or non-financial activity, but the chances of a sale are small as the market caps of both companies are now 40% less than their value recorded in their parent companies' books.
This means that if Dankner and Tshuva are forced to sell their insurance operations in the near future, they will make a substantial accounting loss, even if they sell them at a large premium on their current market prices.
Phoenix's current market value is NIS 1.9 billion, after a 25% in its share price over the past 12 months. This gives a sale price of NIS 1.15 billion for Delek's stake, compared with the NIS 1.9 billion value at which Delek books the company. With a gap like this, there is essentially no chance that Delek could make a capital gain on the sale of the company.
The situation for IDB is the same. Clal Insurance's current market value is NIS 2.5 billion, after a 35% in its share price over the past 12 months. This gives a sale price of NIS 1.35 billion for IDB's stake, compared with the NIS 2.2 billion value at which IDB booked the company at the end of 2011.
A second obstacle to a sale
On top of the plunge in Phoenix and Clal Insurance's market caps, there is another cloud that darkens the chances of a sale of control of the companies, especially in the case of Clal Insurance - it is the midst of a very public battle to be unionized.
Commenting on the unionization battle between its employees and management at Clal Insurance, a top capital market source told "Globes" that, as a rule of thumb, unionizing a company cuts its value by 10%. There is a reason why the entire insurance industry is waiting for results of the battle between Clal Insurance's management and employees before decided whether and how to act, given that the Histadrut (General Federation of Labor in Israel) is reportedly trying to unionize other insurance companies.
Published by Globes [online], Israel business news - www.globes-online.com - on June 19, 2012
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