The Harel Insurance Investments group is currently negotiating the sale of 20% of its shares to either Discount Bank or one of two large insurance companies (one in the UK and one in Western Europe) for $80 million. Insurance circles estimate that negotiations are proceeding concurrently with Switzerland's insurance and finance group, Zurich, with British insurance company Royal Sun Alliance, and possibly also with other companies.
The Harel group is controlled by the Hamburger family. Sources associated with the group told "Globes" that the deal has a threefold objective:
Firstly, Harel plans to start marketing insurance and health coverage in Western Europe. Partnership with a European company will enable it to market such policies through the European partner. This will be the first time, since Hasneh, that an Israeli company is marketing insurance coverage overseas.
Harel specialises and is a leader in the marketing of health insurance, mainly through subsidiary company Shiloah. Harel will seek the permission of the Supervisor of Insurance to enter this new field, details on which are being released for the first time today.
The second objective is the repayment of a short-term bank loan totalling NIS 281 million that Harel borrowed from local banks at the end of 1999. Its purpose was to provide 90% financing for acquiring Zion Insurance, for which Harel paid NIS 312 million.
The third objective is to strengthen its financial standing and to enter into additional fields of activity and investment.
The Bank Holdings Law permits banks to acquire up to 20% of an insurance company. Discount Bank, owner of an insurance agency, showed interest in the past in acquiring a package of shares in an insurance company.
The Zurich group is one of the leaders in insurance and finance in Switzerland. For many years, it has been conducting business ties with the Harel group. The subsidiary company, Zurich Re, is a leading reinsurer in Harel business. The Hamishmar insurance agency, controlled by the Hamburger family, is the Israeli representative of Alpina, a subsidiary company in the Zurich Re group.
Royal Sun Alliance, the largest insurance company in the UK, has had business ties with Harel for many years.
Harel is Israel's third largest business group, after Migdal and Clal Insurance. Last year, it grossed NIS 3.05 billion in premiums and fees, and it holds a 13% share of the sector. Its net profit in 1999 totalled NIS 150.9 million.
Harel is the 100% owner of insurance companies Sahar, Shiloah and Zion, and has a 65% stake in Dykla. It also holds 100% of Harel Capital Markets, 70% of a commercial and office building in Shoham, 50% of real estate company Har-Esh, 40% of a dental clinics chain, 35% of Eihut Capital Markets and Investment, 15% of Second Channel concessionaire Telad, and more.
As of Sunday, Harel's market value stood at $316 million. The company estimates that it will be able to sell the shares at a price some 25% higher than market.
Some months ago, Prof. Yitzhak Suari examined the value of Harel, and concluded that it was worth at least $400 million. Suari told "Globes" today that, as far as he is aware, the examination was conducted for the purpose of a possible deal for the sale of shares to Discount Bank.
Gideon Hamburger commented that the company was negotiating with at least two European entities in the insurance and finance sector for the sale of 20% of its shares. He said this was being done with a view to strengthening the company's financial structure, and that Harel would be selling existing shares, rather than issuing new ones. Hamburger said he would not comment on the bodies taking part in the negotiations.
Discount Bank's spokesperson commented: "We do not respond to reports on these subjects."
Published by Israel's Business Arena on 10 July 2000