Argentinian tycoon Eduardo Elsztain, the chairman and controlling shareholder of Israeli conglomerate IDB Development Corp (IDBD), is said to have appointed JPMorgan to find an exit strategy for the group’s subsidiary Clal Insurance.
IDB Group is one of Israel’s preeminent business groups, holding leading corporations in key business sectors alongside an ever-growing, global presence through diverse portfolio companies and joint ventures. IDBD, founded in 1981, is the parent company through which IDB Holding Corp. steers IDB Group’s activities. IDB Holding Corp. was voluntarily delisted from the Tel Aviv Stock Exchange in August 2015. The group’s main operating segments consist of its investment arm Discount Investment Corp. Ltd. (TLV: DISI), and its insurance and finance arm Clal Insurance Enterprises Holdings Ltd.
Elsztain, who according to Reuters is said to have invested nearly 2.5 billion shekels ($665 million) in IDB, acquired the heavily indebted IDB group from former Israeli tycoon Nochi Dankner when it was structured as a six-layer pyramid with one holding company controlling another and had 16 billion shekels in debt. IDB and Discount combined now reportedly have debt of 5.6 billion shekels.
After Elsztain took effective control of IDBD in October 2015, his Buenos Aires-based leading agribusiness Cresud (NASDAQ: CRESY; BASE: CRES) started consolidating IDBD within its financial reports, as of its fiscal quarter ending December 31, 2015.
Discount Investment Corp., founded in 1961, remains one of the largest and most prominent holding companies in Israel. It has holdings in companies that are market leaders in their specific fields, including Cellcom, the largest cellular operator in Israel (41.8%); Shufersal, the largest grocery retail chain in Israel (52.9%); Property and Building Corporation, one of the largest real-estate groups in Israel (76.5%); and Elron, a high-tech operating investment company (50.3%).
In July 2016, China National Chemical Corp. (ChemChina), agreed to buy out IDB Holding Corp. subsidiary Koor’s remaining 40% stake in Tel Aviv-based Adama Holding Ltd., one of the world’s leading crop protection companies, for $1.4 billion, consisting of $230 million in cash and the assumption of $1.17 billion in debt. The deal valued Adama’s equity at $3.5 billion.
Discount Investment Corp. said it would report a capital gain of 690 million shekels ($178.5 million) from the sale to ChemChina, a state-owned enterprise established through a reorganization and consolidation of China’s former Ministry of Chemical Industry Ministry subsidiary companies. With revenues of $45 billion in 2015, ChemChina is China’s largest chemical company. It has more than 140,000 employees, of which 48,000 are outside China.
IDB is required to sell its stake in Clal to abide by Israeli regulatory requirements that prohibit holding companies from owning both financial and non-financial businesses. The latest move follows two failed attempts by IDB to sell its 55 percent stake in Clal, one of Israel’s biggest insurers, to Chinese investors.
“We are spending a lot of money, time and effort to achieve … a sale,” Elsztain said at a news conference this week, to mark four years since he invested in IDB. “A forced sale will make a tremendous loss to shareholders,” he added, according to Reuters.
IDB had an agreement with Israel’s capital markets and insurance regulator that if it did not sell Clal by early 2016, it would have to sell its majority stake in the company piece-by-piece, in tranches of up to 5 percent every four months. The matter is now pending a decision by the Tel Aviv District court.
Delek Group (TASE: DLEKG; ADR: DGRLY), another Israeli conglomerate and Israel’s dominant energy company, also faced certain challenges trying to sell its majority stake in insurance company Phoenix Holdings Ltd (TASE: PHOE). However, last month Delek said it signed a binding agreement to sell its 52.3 percent stake in Phoenix to Chinese conglomerate Fujian Yango Group (SZSE: 671), for 1.95 billion shekels ($516 million) in cash. The deal is now subject to regulatory approval.
Photo: Eduardo Elsztain, Chairman of IDB, Discount Investment Corp, IRSA, CRESUD, BrasilAgro and Banco Hipotecario.