Generali to cut Migdal value by NIS 1b

Shlomo Eliahu's talks with new Generali CEO Mario Greco will not be whether to lower Migdal's price, but by how much.

Sources inform ''Globes'' that Assicurazioni Generali CEO Mario Greco is in Israel and it is believed that he will cut the company value of Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) for its sale to Shlomo Eliahu Holdings Ltd. by NIS 1 billion; i.e. from NIS 6 billion to NIS 5 billion.

However, it is possible that this reduction will satisfy neither Shlomo Eliahu or Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig, who has been forced to intervene in the price of the deal, because of the drop in the value of Eliahu Holdings' assets caused by the continuing fall in the capital markets. Sources say that Italy's Assicurazioni Generali SpA (BIT: GASI) may ultimately cut the value for the sale of its 69.13% stake of Migdal to Shlomo Eliahu.

When Eliahu and Generali signed the Migdal deal on March 7, the price for the stake was €814 million, or NIS 4.2 billion, reflecting a company value of NIS 6.05 billion. A subsequent dividend by Migdal lowered the price tag for the stake to NIS 4 billion. Regulatory changes in the insurance market and capital market developments since the deal was signed have cut Migdal's value further. The 25% drop in Migdal share price over this period, reduced its market cap to NIS 4 billion, which means that Eliahu would pay a 50% premium at the deal's original price, compared with a reasonable premium of 13% at Migdal's value on March 7.

"Globes" was the first to spot the change business climate of the Migdal deal, and that Eliahu had the power to amend the terms or cancel the deal.

Generali, Italy's largest insurance company, announced Greco's appointment of CEO on August 1. This means that one of his first and most urgent tasks is to save the sale of Migdal, and to close a deal as soon as possible in order for Generali to secure the proceeds it needs in view of the dismal economic situation of Italy and the company and its bond rating.

Eliahu declined to comment on the report. Generali's longstanding Israeli attorney, Adv. Yehoshua Rosenzweig, who is handling the sale, also declined to comment.

Sources close to Generali believe that Eliahu wants to close the deal, and is not seeking to use the regulator to cancel it. Sources in Italy believe that Eliahu, who agreed to acquire Migdal without due diligence, knows what he is buying, is familiar with Migdal and its assets and liabilities, and did not make a deal that was dependent on a price or capital market volatility, or even the regulator's update to Israel's actuarial tables.

Eliahu, an insurance industry veteran, has reportedly made the deal of a lifetime. He has gone through good and bad times, and they are not a deciding factor in the deal, especially as he made it when the global economic situation was already clear. "He fell in love with Migdal, just as he once fell in love with Bank Leumi (TASE: LUMI)," a source familiar with the deal said today. However, at the same time, as an experienced businessman, he will not overpay for his new love, which means that the talks will not be whether to lower the price, but by how much.

Published by Globes [online], Israel business news - - on August 5, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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