Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) has signed a non-binding letter of understanding in negotiations for a possible acquisition of a stake in the company that operates the Herzliya Medical Center.
Herzliya Medical Center is a leading private hospital owned by Yair Landau (50%), Clalit Health Services (40%), and Clal Insurance (10%). As far as is known, the negotiations are between Migdal and Landau; Clalit Health Services and Clal Insurance are not negotiating to sell their holdings to Migdal.
It can nevertheless not be ruled out that Landau will buy Clal Insurance's holdings, and will then sell some of his shares to Migdal. Under any possible scenario, Landau will continue to hold shares in Herzliya Medical Center. No binding agreements have been reached; completion of the deal depends on due diligence by Migdal, obtaining regulatory approval, and the signing of a binding agreement.
Market sources said that Landau wanted to sell according to a NIS 800 million-1 billion valuation for Herzliya Medical Center.
Herzliya Medical Center's website states that the hospital was founded 35 years ago, and that it has a staff of 600 employees in all areas of medicine, "who perform over 20,000 operations annually in a variety of fields, including cardiac, heavy neurosurgery (brain and spinal column), general, gynecological, urological, robot, ENT, and other surgery."
For Migdal, the deal is a strategic one that creates a service envelope for the company's customers and expands the actual payments for its ordinary insurance through a minority holding in a profitable private hospital that usually distributes dividends every year. The deal is a change in possible growth directions for Migdal, controlled by Shlomo Eliyahu and managed by chairman Nir Gilad and CEO Ran Oz, aimed at rehabilitating its relative status in the insurance sector.
Up until now, it appeared that under Eliyahu's control, Migdal was selling off holdings that were not part of its core insurance and financial business. Now, however, the acquisition of non-insurance business is being considered, albeit activity that is tangentially related to the group's activity. In other words, this deal is more typical of Migdal before Eliyahu gained control of it.
Migdal is active in health insurance, as in most insurance branches, but is not a leader in this market, in which the pacesetter is Harel Insurance. Nevertheless, acquisition of a substantial chink of Herzliya Medical Center hints at the emphasis that Migdal wishes to place on growth in the health branch. There are currently only three insurance companies with substantial holdings in medical clinics: Harel, which holds Merav (which changed its name to Rafael); Ayalon Insurance, which earlier this year acquired 20% of TLV Medical Center, a multidisciplinary surgical center in Tel Aviv at a valuation of NIS 40 million, after money; and Clal Insurance with its 10% share of Herzliya Medical Center.
Published by Globes, Israel business news - en.globes.co.il - on November 12, 2019
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