The newד that Medtronic is buying surgical robotic guidance system developer Mazor Robotics Ltd. (TASE:MZOR) for $1.64 billion sent the Israeli company's share price soaring up over 105 yesterday. But it's safe to assume that the management of the Tel Aviv Stock Exchange (TASE) is not especially happy about the acquisition. Mazor will become the fourth company to delist from the TASE's Tel Aviv 35 Index (the largest companies traded on the market by market cap) this year - three of them following acquisitions. Last month, Sodastream International Ltd. (Nasdaq: SODA; TASE: SODA) was acquired by PepsiCo for $3.2 billion and in May IFF announced it was acquiring Frutarom Industries Ltd. (TASE: FRUT; LSE:FRUT; OTCBB:FRUTF) for $7.1 billion. Earlier in the year, generic pharmaceutical giant Mylan N.V. delisted following its failed hostile takeover bid for Perrigo Company (NYSE:PRGO; TASE:PRGO). The only comfort is that IFF will list in Tel Aviv, replacing Frutarom.
Ayalon Group head of strategy Yaniv Pagot said, "I don't remember a year in which three Tel Aviv 35 Index companies were acquired and delisted from trading. The whole idea of the Tel Aviv 35 Index, which was formed 18 months ago, was to increase the spread, and make it less distorted towards Teva and the banks. These companies - Frutarom, Sodastream and Mazor - provided a response to the TASE's desire to achieve a spread. These are 'second tier' companies that were growing fast and from this point of view there is no doubt that the sectoral spread and engine of growth of the index has been hit. Anybody saying otherwise is trying to pain a prettier picture. There aren't another 10 Mazors, Sodastreams or Frutaroms waiting to be found - not even five or three. This product that is called the TASE has certainly been hit - not hit hard but certainly harmed."
He added, "There is a theory that when you create exits, you in effect pave the way for other companies to join the index and thus increase appetite for investment in them. In other words there is an indirect value in bringing in other companies and a positive impact in the medium to long term. But the TASE and its large indices are classic small-cap in global terms and when you take large shares with no reserves on the horizon, a type of vacuum is created." On the exchange of IFF for Frutarom, Pagot commented, "It is not an Israeli company and not a genuine replacement but just a replacement for trading. The question is whether the Israeli stock exchange, after three companies have moved outside, reflects the economy? IFF does not reflect the domestic economy. Usually these companies come here to enjoy trading volume and be part of the indices and at a certain stage get tired and don't stay on."
"experience shows that even Israeli companies delist, so it is logical that a company with no Israeli connection will do whatever it fancies, for example if it encounters tough regulation or corporate governance rules. In other words, it is not only a reflection of the Israeli economy but also the commitment of these companies to remain on the TASE, even during more difficult times."
Published by Globes [online], Israel business news - www.globes-online.com - on September 26, 2018
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