Chinese companies eye Israel’s Clal Insurance
ChemChina may vie with another Chinese company, China Minsheng, to buy control of the Israeli insurance company Clal.
Chinese agro-chemical giant ChemChina, which acquired Adama Holding Ltd. (TASE:ADMA.B1) (formerly Makhteshim Agan Industries Ltd.) from IDB Development Corporation Ltd. (TASE:IDBD) joins a long list of Chinese entities interested in buying Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) from IDB.
Clal Insurance CEO Izzy Cohen has recently met with ChemChina CEO Ren Jianxin to discuss the sale. ChemChina is currently examining the possibility of entering the medical field. This was the first meeting and IDB and Clal Insurance now must wait for an answer from the Chinese. The meeting had been organized by US investment bank JP Morgan, hired by IDB to promote the sale. At present, ChemChina has shown only an initial interest, which comes at the same time as another Chinese company, China Minsheng, mulls buying Clal Insurance shares via its US subsidiary Sirius.
Transferring control of an insurance group requires the approval of the Finance Ministry’s Supervisor of Insurance, Capital Markets and Savings, which has in past years made it difficult for foreign entities, specifically Chinese business entities, to receive approval. Analysts believe that because ChemChina is directly controlled by the Chinese government, approval of the sale will be particularly difficult. Moreover, at present IDB and its controlling shareholder Eduardo Elsztain disagree with Supervisor of Insurance Dorit Salinger over the outline for the sale of Clal’s controlling share.
Clal’s controlling share has been put up for sale for over three years, following the financial collapse of the IDB concern, under its previous owner Nochi Dankner. Afterwards, the controlling share was taken from IDB and given to a trustee appointed by the Finance Ministry: Moshe Terry. Several unsuccessful attempts to sell control to a strategic buyer have been made since. Eventually, the supervisor had decided that the shares will be sold on the market in a gradual sale outline set with the company when the trustee was appointed. Moreover, IDB is also obliged to sell Clal Insurance due to the Promotion of Competition and Reduction of Concentration Law.
The implementation of the outline prepared by the supervisor elicited severe opposition in IDB, which contests this move due to concerns that the shares will be sold without a control premium and at a cheap price. The issue was recently examined in the Tel Aviv District Court by Judge Ruth Ronen, but remained unresolved after Salinger’s attorney rejected the compromise proposed. Another court hearing is expected after the high holy days while Terry has made it clear that without a decision, he will not begin implementing the outline.
ChemChina is a giant international firm controlled by the Chinese government, valued at many dozens of billions of dollars. In 2011, it acquired the Israeli pesticide producer Makhteshim Agan, renamed Adama. Two months ago, it completed the acquisition of the rest of IDB’s stake in Adama – 40% – for $230 million and a $1.1 billion loan write-off. ChemChina will have no problem to pay hundreds of millions of dollars for Clal Insurance, after carrying out deals totaling dozens of billions of dollars worldwide.