Clal Drops to 3-Year Low as China's Macrolink Walks Away

  • Sale of IDB's Clal Insurance holding stumbles on regulation
  • Regulator says IDB must divest controlling stake in company

IDB Development Ltd. and its subsidiary Clal Insurance Enterprises Holdings Ltd. plunged after China’s Macrolink Holding Company Ltd. walked away from talks on buying the Israeli insurer due to regulatory uncertainty, IDB said in a statement.

Shares and bonds in IDB Development, controlled by Argentinian businessman Eduardo Elsztain, dropped after the company failed to reach an agreement for the sale of Clal within the January 7 deadline set by the regulator. Macrolink’s withdrawal means IDB is required by the regulator to sell its controlling stake in Clal in tranches via the bourse or in private transactions, according to a letter from December 2014 from the Finance Ministry to IDB.

“It will be harder for IDB to sell its stake on the bourse and it will be a matter of price,” Meir Slater, head of research at Bank of Jerusalem Ltd. in Tel Aviv, said by phone. “This is bad news for IDB bondholders as it means that they are likely to get less money than they were expecting.”

Macrolink decided to end purchase negotiations over concerns about receiving the regulatory permit that arose after meeting with the Israeli regulator, IDB said in a statement to the Tel Aviv bourse, adding that it is not currently in talks with other buyers. IDB needs to sell its stake in Clal after the Finance Ministry didn’t allow Elsztain to hold on to Clal after he became IDB’s controlling shareholder.

Almost Double

The Macrolink deal would have valued Clal at 4.65 billion shekels, almost double its current market value, Calcalist reported on Dec. 29. Clal Insurance was the second-worst performer on the TA-100 Index on Wednesday, falling 9.1 percent to the lowest level since Oct. 2012 at the close. IDB shares fell 8.5 percent to the lowest since May 20. Its 4.5 percent bonds due June 2018 fell, pushing the yield up 915 basis points.

“The regulatory uncertainty faced by the Clal bidder is likely to make it harder for other buyers in the industry to close a deal,” Slater said.

The unwinding of the negotiations comes as Delek Group Ltd. is in advanced talks with China’s Fosun International Holdings Ltd. for the sale of its stake in Israeli insurer Phoenix Holdings Ltd. The Fosun chairman is expected to visit Israel this week to complete the deal, Calcalist reported on Tuesday. Delek needs to sell Phoenix to comply with a law passed in December 2013 that prohibits Israeli companies from owning financial services corporations as well as industrial businesses.

Phoenix shares declined 2.5 percent against a 0.5 percent drop for the TA-25 benchmark index.

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