Israel’s efforts to simplify corporate structures and cut cross ownership will force companies to sell assets, creating opportunities for private equity funds, said Markstone Capital Group’s Ron Lubash.
“The business empires are under a huge amount of pressure because of changing sentiment and changing regulation and a variety of other changes, which will now force them to probably shed a lot of their assets,” Lubash, chief executive officer of Markstone, a Tel Aviv-based private equity fund, said in an interview at Bloomberg’s headquarters in New York yesterday. “A lot of ownership will change hands. I’m talking about hundreds of companies.”
Israeli stocks are lagging behind U.S. equities this year on concern tighter regulation and government reform will bolster competition and erode earnings. Tel Aviv’s benchmark TA-25 Index (TA-25) has climbed 4.2 percent in 2012, compared with a 13 percent jump in the Nasdaq Composite Index. (CCMP) The Bloomberg Israel-US Equity Index of the most-traded Israeli companies in New York fell 0.3 percent yesterday, paring its gain this year to 8.4 percent. The TA-25 Index lost 1.3 percent today.
The nation’s committee on economic concentration proposed limiting company structures to three public layers in recommendations submitted to Prime Minister Benjamin Netanyahu on March 20. Under the new rules, holding companies will need to reduce cross-holdings in financial and industrial businesses and minority shareholders will have more power within third-level holding companies.
‘Various Types of Investors’
“Structural changes open up a significant number of opportunities for various types of investors,” said Lubash, who is a former managing director at Lehman Brothers Holdings Inc. and was in New York meeting people about his investment in online options trading company Win Global Markets Inc. (WGMI) “Private equity is a useful tool in a structural change, but not only, there will be other investors that will flock into some of these companies.”
The reforms being pushed by the committee are aimed at boosting competition in Israel and target the nation’s 10 biggest corporations, which comprise 41 percent of the value of listed companies, according to the Finance Ministry.
Win Global, based in Tel Aviv, provides an Internet platform for options trading where retail investors can bet on stock movements. The company has about 60,000 registered users and 70 percent are located in the U.S., Shimon Citron, chief executive officer of the company, said in an interview in New York yesterday.
‘Land of Opportunity’
Lubash was part of a group that invested $1 million in Win Global in August. He has also invested in agricultural and medical technology companies including Zeraim Gedera Ltd. and Given Imaging Ltd.
“Israel is the land of opportunity for investors,” Lubash said yesterday. “There are new emerging, interesting industries every year.”
Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies trading on the Nasdaq Stock Market, the most of any nation outside the U.S. after China. The country is also home to more startup companies per capita than the U.S.
Moody’s Investors Service cut the outlook on Israel’s banking system to negative from stable yesterday on expectations the economy will slow and a “challenging operating environment” will exist in the country over the next year to 18 months. The central bank forecasts growth in gross domestic product will slow to 3.1 percent in 2012, from 4.8 percent in 2011.
Perrigo Co. (PRGO), the largest U.S. maker of generic over-the-counter drugs, slumped the most since October in New York after the company cut its revenue growth forecast and posted earnings that missed analysts’ estimates.
Shares of the Allegan, Michigan-based drugmaker slid 3.6 percent to $100, the lowest level since Feb. 27. The stock yesterday traded at a premium of 72 cents over its Tel Aviv-listed shares. Perrigo rose 1 percent to 381.7 shekels, or the equivalent of $99.91.
Sales grew 13 percent to $778 million in the third quarter ending March 31, compared with the $823 million median of 12 analysts’ estimates compiled by Bloomberg. Perrigo lowered its 2012 growth outlook to between 15 percent to 18 percent, from 17 percent to 20 percent, citing a mild influenza season.
Internet Gold-Golden Lines Ltd. (IGLD), the company that controls Bezeq Israeli Telecommunication Corp., fell 4.1 percent to $5.64 in New York, the lowest level in three weeks. The company’s Tel Aviv shares lost 4.9 percent to 19.94 shekels, or the equivalent of $5.22.
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