Apax Partners, whose activity in Israel is managed by Zehavit Cohen, is considering taking steps towards splitting off and selling activities of Psagot Investment House in order to sell its holding in the investment institution.
Sources inform "Globes" that separation of the provident funds from the mutual funds and portfolio management is under consideration. For Apax, this is a tool for enhancing the entire investment house's value, while taking advantage of the high valuation given by the capital market to the provident and pension fund activity of Altshuler Shaham, Psagot's competitor and simultaneously taking advantage of the boom in the activity of Psagot's own mutual funds activity. Apax said, "We do not respond to rumors."
Capital market sources believe that Apax wants to sell the company in parts for several reasons. Among other things, the sale of all of its activity together will reduce the number of coompanies interested in Psagot that are capable of making such a deal. Apax also wants to add local financial companies to the list of potential buyers.
One of the reasons for this is regulatory restrictions resulting from Psagot's size in long-term savings, an area in which only companies for whom the acquisition of Psagot would not increase their market share to over 15% of the new pension savings market could consider such an acquisition.
The measure being considered is connected to a structural change led by the investment house recently, with its investment sale being dismantled and the sales activity being put together with all of Psagot's activity.
NIS 200 billion in managed assets
Apax acquired control of Psagot in 2010 from York Capital Management at a valuation of NIS 2.7 billion, which many regarded as an inflated value. In late 2015, Apax acquired the 23% minority holding of Markstone Fund in Psagot at a company valuation of only NIS 1.9 billion.
Over the years, and still now, according to reports to investors, Apax has tried to sell its holding in several ways, including a strategic sale of the entire investment house and a stock exchange offering. A differently structured proceeding is now on the table.
From its report to investors for 2018, it was learned that in the fourth quarter of 2018, Apax cut its valuation for Psagot to €434 million, and to NIS 1.86 billion, excluding debt, representing a 20% profit on its investment for Apax.
This value is over 9% below the NIS 2.05 billion price at which Psagot was valuated in September 2018, and over 12% below the NIS 2.12 billion valuation given to the investment house in June 2018.
As of the end of 2019, Psagot manages nearly NIS 200 billion in assets, thanks to the capital market boom, which brought about strong returns in the market in general and an increase in the value of the managed assets by Psagot to a record level.
As far as is known, it was already at this peak between late 2016 and mid-2017, when its managed assets reached NIS 198 billion. Managed assets totaled NIS 177 billion as of the end of 2018.
Not the same as the sale of Psagot's insurance business
Psagot's management changed last year, with the resignation of then-chair Michal Abadi-Bouiangui. Later last year, CEO Barak Soreni resigned and was replaced by Reuven Kaplan, who was formerly CEO of Clal Health and Amidar, among other things.
Psagot operates in a variety of financial service fields, and is among the market leaders in key areas, such as provident funds and mutual funds.
Psagot manages NIS 56.8 billion in provident fund and training fund assets, putting it in second place in this market after Altshuler Shaham Provident and Pension Funds, which held its IPO last year at a valuation of NIS 1.17 billion, and has since soared to a market cap of almost NIS 2.4 billion.
As of the end of 2019, Psagot's provident and pension fund company had a 10.6% share of the provident and training fund market, with provident and training fund assets amounting to NIS 56.9 billion, and a 0.8% share of the new pension market, with NIS 3 billion in new pension fund assets. In total, as of the end of 2019, Psagot Provident and Pension Fund had a 6.4% share of the total provident and pension fund market.
In addition, Psagot has NIS 51.5 billion in mutual fund assets, amounting to 14.7% of the mutual fund market. Psagot is the second largest player in the funds market as a whole, and was among the leading concerns in raising money in this market last year. Psagot's share of the conventional funds market was 12.3%, putting it in second place in the market.
Where sales of activity are concerned, in 2018, Psagot itself (not Apax) sold its relatively moderate insurance activity to Ayalon Insurance. This measure was not aimed at enhancing value; the aim was to exit a sector that did not become what Psagot expected it would.
Published by Globes [online], Israel business news - en.globes.co.il - on January 20, 2020
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