The foreign company that is apparently in talks to acquire the controlling core of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) from Nochi Dankner's IDB Holding Corp. Ltd. (TASE:IDBH) is Thailand's CP Group, owned by chairman and CEO Dhanin Chearavanont, a Thai of Chinese origin. Earlier this year, CP Group acquired Ping An Insurance Group Co. of China Ltd. (HKSE: 2318)
The parties' lawyers are apparently trying to tie up loose ends of the deal. CP Group is apparently represented by Meitar Liquornik Geva Leshem Tal. A source close to the talks said, "It's true that nothing is certain yet, but it seems that there is a good chance of a deal real soon."
The potential buyer reportedly examined Clal Insurance in recent weeks, including by Ernst & Young, whose Israeli affiliate is thoroughly familiar with the local insurance industry, and it does not intend to conduct due diligence. If that is the case, the deal will be an as-is deal for Clal Insurance.
Capital market sources believe that if the parties agree on the business aspects, an equally big hurdle still awaits them: obtaining a control permit for the buyer for Clal Insurance. IDB and the potential buyer have a tentative go-ahead from the Capital Markets, Insurance and Savings Supervision Department to continue the talks. However, final approval of the deal requires the regulator to conduct a thorough international fit and proper examination of the buyer. Only when the regulator completes this, will the parties be able to close the deal.
If and when a deal is closed, this will be the second time that an Asian tycoon has acquired the controlling core of a major Israeli insurance company. The first was the acquisition of part of the controlling core in Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) by Indonesia's Sampoerna Group, which owned the stake for four years. It paid the Hamburger family and Israel Discount Bank (TASE: DSCT) NIS 800 million for 20% of Harel, Israel's third largest insurance company, in 2006, and sold the stake February 2010.
At the order of the Tel Aviv District Court, IDB must sell half of its 55% stake in Clal Insurance by August 22. In a notice to the TASE on Wednesday, IDB said that it "was in advanced talks with a group of Chinese investors for the sale of 30% of Clal Insurance at a company value of NIS 4.6 billion."
If a deal is closed at that price, IDB Holding's wholly-owned subsidiary IDB Development Corporation will see a pretax capital injection of NIS 1.4 billion. In addition, IDB will have a put option and the buyer will have a call option, the terms of which are not known at this time, for the sale of the remaining 25% of IDB's stake in Clal Insurance to CP Group.
Alongside the pending deal between IDB and CP Group, the Histadrut (General Federation of Labor in Israel) today warned Clal Insurance, "If management does not return to the negotiating table, a labor dispute will be declared at the company. This demand is due to the deadlock in the negotiations with management for the past three months on a collective agreement at the company. The employees are worried that the intensive negotiations underway by the controlling shareholder for the sale of the company, without the participation of the workers' representative, unilaterally and with no transparency, will jeopardize their job security and the company's stability."
Published by Globes [online], Israel business news - www.globes-online.com - on July 25, 2013
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