IDB says yes to Premira, cuts Clal value

Talks between foreign fund, IDB proceed. Negotiations focus on revaluation of $1.5-1.6 billion for Clal Insurance, reflecting premium of over 50% on its current market cap

Golan Hazani, Calcalist|Published: 08.31.11 , 08:10

Talks between Premira Fund and IDB over the acquisition of Clal Insurance's controlling interest are forging ahead; however, Calcalist has learned that the deal's price range was cut upon Premira's request.

The fund informed IDB that wherein several months ago it was willing to fork out about NIS 3.7 billion (about $1 billion) for IDB's stake in Clal Insurance (54.9%), this value is no longer relevant and a new price, and a much lower one at that, must be negotiated.

The grounds for Premira's demand are the market crisis as well as concerns that the social crisis and protest in Israel might compromise Clal Insurance's results.

Premira reexamined the deal and in an interview last week to Calcalist, the fund's local representative, attorney Micky Zelmeir hinted at the turn of events by saying that "in the past, Premira was interested in making the deal but IDB dragged their feet and now the tables have turned."

With that said, negotiations are still underway and according to sources close to the talks, IDB is negotiating in consent to a new price layout.

Until now, Dankner sought to sell control over Clal Insurance on a $1.9-2 billion valuation whereas Premira agreed to a price that would reflect a $1.7-1.8 billion valuation. Now the value might drop to $1.5-1.6 billion which anyway is a higher value than Clal's current market cap – some $985 million.

Although not an option an the moment, Premira's withdrawal from the talks might leave Clal Insurance with not one prospective buyer in a time when the committee appointed by the prime minister to examine reforms in Israel's economy is expected to require the separation of real and financial assets on part of the economy's tycoons.

Such an outcome might obligate tycoons who own insurance companies the likes of IDB owner Nochi Dankner and Phoenix owner Yitzhak Tshuva to dump their holdings in insurance companies.

German Talanx Group, which until several months ago competed with Premira over the acquisition of Clal Insurance, decided to drop out of the race upon realizing Israel's regulatory restrictions in the insurance field.