Apax Partners, the controlling shareholder in Psagot Investment House Ltd., is considering a merger of Israel's largest investment house with Direct Insurance - Financial Investments Ltd. (TASE: DIFI) subsidiary IDI Israel Direct Insurance Ltd. (TASE: DIFI), sources inform "Globes." As far as is known, representatives of Apax, managed in Israel by Zehavit Cohen, met with representatives of the Schneidman family, which controls Direct Insurance, to discuss ways of pushing the deal forward.
It is still unclear whether and how a deal between the two companies will take place, but it is believed that a share swap is under consideration. A source close to Psagot said, "The subject is always around, but nothing concrete is on the agenda." Sources close to Direct Insurance denied that such contacts were taking place, and company management stated, "The information is incorrect."
A merger between Psagot and Direct Insurance, if it comes off, will create a financial giant with a presence in a range of sectors, including financial products management (mutual funds, provident funds, advanced training funds, and investment portfolio management), long-term savings management (life insurance, new pensions, and provident funds), and a variety of insurance products for individuals.
Psagot, managed by CEO Hagai Badash, manages NIS 195 billion in assets in mutual funds, provident funds, and other instruments. As of the end of 2013, the investment house was valued by Apax, which acquired control of it in late 2010, at NIS 2.7 billion in its books. "Globes" previously revealed that Psagot finished 2013 with NIS 840 million in revenue, down 2.3%, compared with 2012, and a NIS 158 million pre-tax profit, down 4%, compared with 2012.
Inferiority in long-term savings
The contacts between the parties hint at a change in Apax's strategic plan for Psagot. It appears that Cohen has realized that starting an insurance business virtually from scratch is not enough to quickly enhance the investment house's value ahead of its sale. Apax has therefore decided to consider merging it with an insurance company, particularly in view of the very high price that Apax is putting on Psagot; together with a number of sectors in which Psagot is among the market leaders, it is definitely strategically inferior to its main competitors in long-term savings.
Psagot's insurance business is far below that of the major insurance groups - Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), and Menorah Mivtachim Holdings Ltd. (TASE: MORA) - and not even close to making back the investment in it. Furthermore, despite Psagot's previously existing new pension business, it is not yet an important factor in the growing pension market.
Published by Globes [online], Israel business news - www.globes-online.com - on July 21, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014