Fosun's Israeli Test

Phoenix purchase a test of whether Guo's dealmaking days are over

China's Fosun says chairman Guo Guangchang is back to work. But it's certainly not business as usual for the acquisitive conglomerate.

The purchase of a controlling stake in insurer Phoenix Holdings for about $476 million is a test of whether Fosun's global dealmaking spree will grind to a halt. And there are signs the transaction will flame out.

Guo, known ambitiously as China's Warren Buffett, has personally steered Fosun's recent overseas expansion, meeting with regulators and potential targets or partners. He flew into Israel earlier this year to help smooth the Phoenix purchase from Delek Group. 

Yet his disappearance last week -- and the company's subsequent acknowledgement that he was "assisting authorities" with an investigation -- surely makes it harder for Israeli authorities to sign off on the deal. 

The transaction is pending approval from authorities in Jerusalem. On Sunday, Delek sought to quell concerns about the dark clouds over Fosun with a statement that representatives from Fosun will visit Israel in the "coming days." Nevertheless, Delek shares are down about 7.7 percent in the past two days.

Other acquisitive Chinese companies have suffered similar setbacks to Fosun. Not one but two top executives at Bright Food -- which picked up British household name cereal brand Weetabix in 2012 -- have been detained by authorities on graft probes in the past 18 months. 

That company has continued to seek international deals, regardless of who's in charge, though its business model is less driven by personality than Fosun's.

Grave Doubts

Bloomberg data

Despite Guo's apparent return to the office Monday, shares in Fosun International fell 10 percent in Hong Kong. It has about $2.2 billion of overseas acquisitions pending. Guo has been central to that spending spree. Any notion his run-in with Chinese authorities will have limited impact is hard to swallow.

(Fosun's proposed acquisition of a controlling stake in Phoenix is pending approval from authorities in Jerusalem. A previous version of this article said the authorities were in Tel Aviv.)
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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