US-based, Chinese-controlled company Sirius is making progress in its effort to acquire control of the The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) insurance company from Delek Group Ltd. (TASE: DLEKG). Delek today announced that Sirius had decided to exercise its call option for buying the remaining 47% in Phoenix owned by Delek Group for NIS 2.3 billion.
The parties recently signed a deal, and Sirius completed the first stage earlier this month, buying 4.9% of Phoenix's shares for NIS 208 million. Total proceeds for the deal will therefore be NIS 2.5 billion.
Despite the progress made in the deal for the sale of a controlling interest in Phoenix, Sirius still faces its main obstacle - obtaining a permit from the Capital Market Authority to hold a controlling interest in Phoenix. Sirius filed its request when it purchased its first shares in the insurance company.
Phoenix's value has risen 50% over the past year
The purchase of the main bloc of shares in the deal, as announced today by Delek Group, reflects a value of over NIS 4.8 billion for Phoenix, 7% higher than the company's market cap of NIS 4.5 billion before the start of today's trading on the TASE. Phoenix's market cap has surged 15% since Delek Group first announced the deal in mid-September.
Phoenix's share has climbed nearly 50% over the past year, in line with the positive sentiment towards most of the shares in the sector, and reflecting a rise of nearly 40% in the Bituach (Insurance) Plus Index within a year.
Delek Group's share, on the other hand, which is up 3-4% today, has been weak for some time, as reflected in the loss of about half of its value within three years. The recent series of falls in the share has cost it 35% of its value within six months, following the poor state of the energy market, where Delek Group conducts most of its business, and concern about future pricing and sales from the Tamar and Leviathan natural gas reservoirs, which it holds mainly through the Delek Drilling Limited Partnership (TASE: DEDR.L).
Progress to the second stage of the Phoenix deal is taking place according to the short timetable set by Delek Group and Sirius for the acquisition of control in Phoenix, which gave the acquiring company 60 days to decide on the second stage.
Sirius has been considering the Israeli insurance market for some time
Sirius, a US insurance holding company under Chinese ownership, holds insurance licenses in the US, Sweden, and the UK. The company has been conducting an in-depth assessment of the Israeli insurance market for some time, and also recently considered a deal to acquire control of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) from IDB Group. The reason is that Delek Group wants to focus on energy business, and must sell its holdings in the financial sector because of the Promotion of Competition and Reduction of Concentration Law. Delek has therefore negotiated numerous times for the sale of control in Phoenix, but all of these negotiations failed.
Three years ago, Delek Group signed a memorandum of understanding on Phoenix with the Kushner family from the US. One year later, a binding agreement was signed with Chinese company Fosun Group, and later also with AmTrust and Chinese company Yango. None of these contacts, however, resulted in a deal. Congratulations for the deal with Sirius are therefore premature, mainly because obtaining approval from the Supervisor of Insurance in Israel is uncertain, and the road to obtaining it is long and full of pitfalls, especially for concerns under Chinese control.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 26, 2017
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