Delek Group Ltd., the Israeli energy-to-insurance conglomerate, is planning to set up a company to hold its $3.5 billion oil and gas-exploration interests that it will seek to list in London.
The entity will help increase foreign investment in Israel’s natural resources market and boost returns for shareholders, Delek said today in a statement. It will hold stakes in companies that have rights to explore Israel’s largest natural gas fields. Shareholders will get one share of the new company for each share held.
Delek is setting up the new company after Israel’s reclassification to developed market from emerging by MSCI Inc. in May 2010 led to an exodus of foreign investors that sent volumes tumbling 44 percent through the end of 2012, according to the Bank of Israel. Mellanox Technologies Ltd. is among companies that have delisted from the exchange, while others, including Israel Chemicals Ltd., have said they plan to dual trade shares in the U.S. to help reach global investors.
“The planned change will enable a larger and more-varied group of investors to access the company’s activities,” Asaf Bartfeld, Delek Group’s chief executive officer, said in the statement. “The aim is to make it a foreign company that will trade in London,” he said in a subsequent phone interview.
The stock advanced 3.7 percent to 1,326 shekels at the close in Tel Aviv, capping the year’s second-best performance on the benchmark gauge. Trading was about 1.5 times the three-month full-day average. The new company will trade on an overseas bourse, in Israel, or both, according to the statement. The plan will be implemented in 2014 subject to regulatory approvals.
The focus on energy will make it easier for investors who tend to shy away from companies with diversified holdings, Bartfeld said in the interview. Delek will also continue its strategy of selling its non-energy assets, he said.
Delek sold stakes in Delek Automotive Systems Ltd. and Delek U.S. Holdings Inc. this year as well as 7 million shares in Phoenix Holdings Ltd.
“The move will speed up Delek’s plans of focusing on its energy sector and releases it from the pressure of selling its non-energy assets,” Guil Bashan, an analyst at Tel Aviv-based IBI-Israel Brokerage & Investments Ltd., said in an e-mailed note to investors today. “We don’t believe this will unlock great value in the near team because the shares are not trading at a discount to its holdings.”
Delek Group’s move follows that of Israel Corp., the holding company controlled by billionaire Idan Ofer, who said in June he will split its businesses to attract investors.
The new entity will include stakes in Delek Energy Systems Ltd., Delek Drilling-LP and Avner Oil Exploration LLP, the company said. Delek’s energy-related stakes are valued at around $3.5 billion, according to data compiled by Bloomberg. Non-energy holdings include IDE Technologies, Delek Europe Holdings Ltd. and Delek Automotive Systems Ltd.
“Delek’s holding structure has made it less popular among international exploration and production investors,” Herzylia, Israel-based UBS AG analyst Roni Biron said in an e-mailed note to investors today. “The move, if implemented, could boost Delek’s E&P profile.”