Sources inform ''Globes'' that Bank Leumi (TASE: LUMI) is demanding an additional NIS 2.4 billion in collateral from Shlomo Eliahu to finance his takeover of Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL). Eliahu is due to acquire the 69.13% stake of Italy's Assicurazioni Generali SpA (BIT: GASI) in the company for €814 million (NIS 3.9 billion), reflecting a company value of NIS 6 billion.
Bank Leumi made the demand after a 15% drop in Migdal's share price since the Ministry of Finance revised actuarial tables last Wednesday and restricted the guaranteed life expectancy coefficient in managers insurance policies. Migdal's share has fallen 20% since Eliahu signed the contract to buy Generali's stake in the company in March. Eliahu has also not completed regulatory requirements for approval of the deal, including the sale of the life insurance portfolio of his Eliahu Insurance Company Ltd.
The plunge in Migdal's share price has widened the premium on the acquisition from 13% of Migdal's market cap to 40%, causing Eliahu a paper loss of NIS 1 billion. He has also taken a hit from the 40% drop in the share price of Bank Leumi, in which he owns 9.59% through Shlomo Eliahu Holdings Ltd., costing him a paper loss of NIS 900 million. Bank Leumi also owns 9.79% of Migdal.
Eliahu has already made a down payment of €125 million on the acquisition of Migdal, which he will lose if the deal falls through. He reportedly plans to finance the acquisition with NIS 1 billion in equity and the rest with financing, including NIS 3 billion in a loan from a banking syndicate led by Bank Leumi. Most of this loan he intends to repay within three years by selling his stake in Bank Leumi and 27.1% stake in Union Bank of Israel (TASE: UNON), as well as the sale of Eliahu Insurance's life insurance portfolio, and the withdrawing of dividends of Midgal and the possible sale of some of its operations.
Market sources say that Eliahu's only escape clause from the deal is if the regulators' nix it, but that is unlikely.
Migdal's share price fell another 1.7% today to NIS 3.85, giving a market cap of NIS 4.1 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on July 15, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012