IDB Development Corporation Ltd. (TASE:IDBD) today announced that the deal for the sale of a controlling interest in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) to Chinese company Macrolink was off. It is now more likely that the controlling interest in Israel's third largest insurance group will be sold by trustee Moshe Tery through the Tel Aviv Stock Exchange (TASE) at a big loss to the seller.
The Clal Insurance share price plunged 9% today in response to the announcement, and the IDB Development share price was down 10%, as were the company's three bond series (G, I, and J). The shortest of the bonds, G, with an average duration of 1.2 years, is currently traded at NIS 0.89 with a 34% yield to maturity, reflecting deep concern among investors that a debt arrangement is not far off. The proceeds from the sale of Clal Insurance were slated for payments this year to IDB Development's creditors. Without these proceeds, it is very doubtful whether the company will be able to find other resources to repay its debt.
IDB must find NIS 800 million in 2016 and NIS 700 million in 2017 to repay its debt and balance its cash flow in those years. The sale of Clal Insurance to the Chinese company would have provided that entire sum and more.
After months of negotiations and the expiration of the deadline set by Supervisor of Capital Markets, Insurance, and Savings Dorit Salinger, IDB Development today lost its last remaining potential buyer for its holdings in Clal Insurance, without any binding agreement for the sale having been signed.
Early in the day, IDB Development was still reporting to the TASE that at the company's request, Salinger had granted another extension until tomorrow to allow the parties to complete the deal. A few hours later, however, the extension proved unnecessary, because Macrolink decided against the acquisition.
Clal Insurance's report to the TASE also said, "Uncertainty concerning the regulatory approval process is alarming the Macrolink group. Recent developments, reports, and other deals in the Israel insurance market have increased the scope of this uncertainty."
The Ministry of Economics and Industry, the leaders of which are currently visiting China and taking part in the international investment conference for Chinese and Israeli investors and companies, today said, "Macrolink VP Dr. Wu Tao notified Ministry of Economics and Industry director general Amit Lang that in view of the excessive demands made of the company by the regulatory agencies in Israel, company management had decided yesterday to withdraw from the deal."
Published by Globes [online], Israel business news - www.globes-online.com - on January 6, 2016
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