Leumi Partners Ltd., the non-financial investment arm of Bank Leumi (TASE: LUMI), is combining with the Schneidman family, the controlling shareholders in Zur Shamir Holdings (TASE: ZUR), in the latter's third attempt to delist Direct Insurance - Financial Investments Ltd. (TASE: DIFI) from the Tel Aviv Stock Exchange (TASE). The objective is to eliminate one layer in the Schneidmans' holdings pyramid, so that the family can comply with the Promotion of Competition and Reduction of Concentration Law.
The parties yesterday reported a deal in which Leumi Partners and other investors it recruits will be allocated 30% of the shares in Direct Insurance held by Zur Shamir. The deal reflects a NIS 1.42 billion value for Direct Insurance, 18% less than yesterday's market cap.
The contingent deal involves a NIS 480 million injection into Direct Insurance by the group of investors for buying up the public's holdings in Direct Insurance. The public currently holds 23% of the shares with a NIS 402 million market value. Since the bank is legally barred from owning more than 10% of an insurance company, Leumi Partners has announced that it will acquire up to 10% of Direct Insurance for up to NIS 150 million. Insofar as the public does not respond to the offer to delist the company, when the offer is made, the deal with Leumi Partners and the other investors it recruits will not go through. Leumi Partners will be entitled to the "usual" commission for marketing the allocated shares.
Leumi Partners and Direct Insurance are closely linked. Among other things, Leumi Partners is leading the major deals in the Zur Shamir group, and is a partner of Direct Insurance in Direct Finance, the non-banking financing company controlled by Direct Insurance. The parties have also agreed that the investors will be allocated unlisted options worth NIS 30 million, currently constituting 5% of Direct Insurance's shares, at no additional cost. The parties will have the right to cancel the deal if Direct Insurance's market cap falls below NIS 1.43 billion (20% less than the current market cap).
When the deal is completed, Leumi Partners and the investors it recruits will sign a shareholders agreement with Zur Shamir, led and managed by cousins Doron and Moshe (Muki) Schneidman. The agreement will settle the relations between the parties, and will include protection against dilution and a policy on distribution of dividends in the company.
Direct Insurance's share has risen 30% during the past year. In February 2014, the Schneidman family's second attempt at delisting Direct Insurance from the TASE failed, that time through a swap offer to purchase for the shares of the subsidiaries, which was not accepted by enough shareholders. Direct Insurance was traded at a market cap of over NIS 1.2 billion at the time, far below its NIS 1.75 billion current market cap. A similar offer was rejected in November 2013.
Through Zur Shamir, the Schneidman family holds 77% of Direct Insurance's shares, which in turn owns half of the shares in successful direct insurance company IDI Israel Direct Insurance Ltd. (TASE: DIFI), income producing real estate company Adgar Investment and Development Ltd. (TASE: ADGR), and private financing company Direct Finance. Since its IPO in August 2013, IDI's share price has surged 195%, raising its current market cap to NIS 2.87 billion, while Adgar's share price has climbed 30% over the past year, and Direct Finance is slated to hold an IPO in the coming years. The shareholders in Direct Finance are Direct Insurance, Leumi Partners, and Altshuler Shaham Ltd. (provident and pension fund members' money). As of this afternoon, the Direct Insurance share price was up 4% on a fairly high turnover, following a 30% rise over the past year. The Zur Shamir share price, which reflects an NIS 850 million market cap for the company rose 1% today, capping a 50% surge over the past year.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 8, 2017
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