Citigroup Israel CEO Sees High-Tech Driving Deals GrowthShoshanna Solomon
Citigroup Inc. is betting on mergers and acquisitions in Israel’s technology industry to drive growth as Google Inc. to Cisco Systems Inc. snap up companies.
“There’s an active M&A scene in the high-tech industry,” Neil Corney, the bank’s chief executive officer in Israel, said in an interview from Tel Aviv. “We expect to see strong deal flow in that area, whether it’s foreign companies buying local startups or IPOs of high-tech Israeli companies abroad.”
The sale of high-tech companies and initial public offerings combined were at a record last year in the country. Eighteen IPOs and the sale of 52 companies raised about $15 billion, compared with $7.6 billion in 2013, according to a PricewaterhouseCoopers LLP report. Microsoft Corp. bought cloud security startup Aorato Ltd. for an undisclosed amount in November, while Google, the largest search provider, paid $969 million in 2013 for Waze, a navigation-software company.
The bank, which has operated in Israel since 1996, employs more than 230 people locally, including 130 at its branch and more than 100 at its Innovation Lab for Financial Technology that was set up in 2011. The center promotes the development of Israeli start-ups specializing in financial technology.
Citigroup’s areas of activity in the country include project finance, corporate lending and investment banking. It doesn’t operate in retail banking. While the bank globally has laid off employees, Corney said the bank has added workers amid Israel’s economic growth. It also has a trading desk in Israel, with five local traders and a sales desk of six.
The economy in the country is forecast to grow 3.1 percent this year compared with 2.8 percent globally, according to data compiled by Bloomberg.
Citigroup was joint bookrunner for the $1 billion August New York IPO of Mobileye NV and joint bookrunner for B Communications Ltd.’s $800 million note offering in February. It has also advised China’s Bright Food Group Co.’s acquisition of Tnuva Food Industries Ltd. in a pending deal that values the Israeli company at around 8.6 billion shekels ($2.2 billion).
The discovery of gas fields offshore Israel is a “real game changer” for the economy, Corney said. It will also lead to “a significant increase in business opportunities, such as export finance and infrastructure finance,” he said.
The Tamar and Leviathan natural gas fields offshore Israel are among the biggest finds in recent years and provide Israel with enough fuel for energy self-sufficiency and exports. Antitrust Commissioner David Gilo said in December he was reconsidering a March 2014 agreement on the fields’ ownership, raising concerns about the future of the industry and criticism from investors about the country’s uncertain regulatory framework.
“International investors prefer to invest where the regulatory environment is transparent and consistent,” Corney said. “They are watching developments in Israel very closely.”
Citigroup also sees promise in the cash held by Israeli institutions seeking to invest abroad. The value of assets managed by institutional investors was about 1.3 trillion shekels at the end of September, according to Bank of Israel data published on Nov. 25.
“There are billions of shekels in the local institutional market looking for a gateway to international markets,” Corney said. “This business has grown considerably already, but we still see huge potential in the years to come.”