IBI, The Phoenix buy Psagot mutual funds

IBI Investment House CEO David Lubetzky  credit: Ilan Besor
IBI Investment House CEO David Lubetzky credit: Ilan Besor

IBI is buying Psagot's passive funds for NIS 150 million, while The Phoenix Holdings is buying its active funds for NIS 147 million.

The final stage of the break up of the assets of investment house Psagot has begun. IBI Investment House (TASE: IBI) reported this morning that its mutual funds company signed an agreement with Psagot yesterday for the purchase of 100% of the shares in Psagot Mutual Funds. Under the agreement, IBI Mutual Funds will buy the company with Psagot’s passive funds business (ETFs and index funds) only. Psagot’s active funds are being acquired by The Phoenix Holdings (TASE: PHOE) for NIS 150 million.

IBI is paying NIS 147 million for Psagot Mutual Funds, subject to adjustments for net debt and cash holdings. At the end of November, Psagot’s passive funds had NIS 24 billion under management, having taken in over NIS 1 billion in these funds in November alone. Psagot manages NIS 12 billion in its index funds, which have taken in NIS 2.78 billion in 2023. It manages a further NIS 12 billion in ETFs, which have taken in NIS 3.25 billion in 2023, making Psagot one of the investment houses with the highest inflows into its passive funds this year.

The acquisition of Psagot Mutual Funds and its passive funds business will substantially increase the amount of assets managed by IBI Mutual Funds, and ETFs are a new area of business for IBI. The sides therefore agreed that IBI Mutual Funds will seek to hire Psagot employees required for continued management and operation of the passive funds.

IBI CEO David Lubetzky said, "As far as we are concerned, this is not a financial deal, but the continuation of implementation of the company’s strategy of accelerated growth through substantial acquisitions. When the deal is completed and the companies merge, the merged funds company will manage NIS 41 billion, and become a prominent player in this business. We believe in the high growth potential of the passive funds market, and in its further possibilities for growth. We look forward to the arrival of the employees of Psagot’s passive funds company, and we are sure that they will find a warm home with us."

Completion of the deal depends on the fulfillment of several conditions, among them full repayment of Psagot’s loan, removal of the mortgage on Psagot Mutual Funds’ assets, and obtaining regulatory approvals, including from the Competition Authority and the Israel Securities Authority.

What is interesting is the way the deal will be financed. IBI will take a loan of NIS 120 million from First International Bank of Israel in the form of government bonds redeemable between 2025 and 2029 with an average yield of 4.5%, which it will sell short. IBI will have to redeem the borrowed bonds on their redemption dates.

The active funds being bought by The Phoenix Holdings manage NIS 22.2 billion. The sale agreement, signed yesterday, includes a no-compete clause.

The Phoenix Holdings CEO Eyal Ben Simon said, "The acquisition of the active funds from Psagot by Phoenix Investment House will significantly expand the group’s asset management and financial services business. This is a further complementary move in the execution of our growth strategy and is in line with the work plan under which the group[ has operated in the past few years."

Phoenix Investment House and KSM Funds CEO Avner Hadad added, "Particularly at this difficult time for the State of Israel, we believe that this is the time to invest in Israel."

IBI was represented by Advs. Tomer Sela and Daniel Aped from Meitar. Psagot was represented by Advs. Jacob Enoch, Sapir Bialistok Franken, and Oded Ofek from Firon Law Firm.

Published by Globes, Israel business news - en.globes.co.il - on December 20, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

IBI Investment House CEO David Lubetzky  credit: Ilan Besor
IBI Investment House CEO David Lubetzky credit: Ilan Besor
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