China Deal Sparks Biggest Jump in 19 Months for Israel’s Phoenix

  • Deal values Phoenix at more than 60% above market price
  • Stock gain reflects doubt that regulator will approve sale

Shares in Israel’s third-largest insurer headed for the biggest gain in 19 months as its latest attempted purchase by a Chinese bidder took a step forward.

Israel’s Phoenix Holdings Ltd. rallied 5.7 percent after its majority owner signed an accord to sell a stake to China’s Fujian Yango Group Co. for 1.95 billion shekels ($517 million). The deal, which must be approved by the Israeli regulator, values the company at a more than 60 percent premium to the insurer’s market value at Sunday’s close.

“The modest reaction in the share price despite the large premium the buyer will pay shows that investors have learned from past failed deals,” Eyal Dabby, head of equity research at Bank Leumi-Le Israel Ltd. in Tel Aviv, wrote in an e-mailed note. “Even if it will be approved the company’s market value will be lower than the purchase price, as investors think that fierce regulation hasn’t come to an end and the Chinese buyer is not fully aware of the impact it is expected to have.”

Delek Group Ltd. has been trying to sell Phoenix for more than two years as part of a strategy to focus on its core business of developing natural gas fields off Israel’s coast and after a 2013 law prohibited companies from owning financial services corporations as well as industrial operations. Previous attempts to sell the insurer have failed because of regulatory hurdles.

Givataim, Israel-based Phoenix trades at 0.58 times book value, compared with an average multiple for the industry of 0.85, according to data compiled by Bloomberg. Delek gained 1.4 percent at 2:30 p.m. in Tel Aviv to the highest level in three weeks.

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