A consortium led by Abu Dhabi state holding firm ADQ are in advanced negotiations to acquire a controlling stake in Israeli financial firm Phoenix Group in a deal that values the company at around 9.2 billion shekels ($2.70 billion), the companies said on Wednesday.
U.S. private investment firms Centerbridge Partners and Gallatin Point Capital, which hold 33.4% of the Israeli firm, are in talks to sell about 25%-30% of the company to the Abu Dhabi funds, the two companies said in a statement. (Editor’s note: Phoenix Group’s insurance subsidiary provides coverages such as business insurance, marine and air insurance, professional liability and directors and officers insurance, as well as home, travel, car, pet, life and healh, and mortgage insurances).
Phoenix’s chief executive and chairman, it said, would also buy 1%-2% of the company.
“The transaction will be subject to regulatory approvals, which will include a control permit from Israel’s Capital Market, Insurance and Savings Authority,” Centerbridge and Gallatin said in the statement.
Some 58% of Phoenix’s shares would remain traded on the Tel Aviv Stock Exchange.
ADQ is buying Centerbridge’s stake in Phoenix, in a non-binding deal, which may take months to complete to receive regulatory and shareholder approvals, according to a source familiar with the deal.
The UAE became the first Gulf state to normalize relations with Israel under a U.S.-brokered normalization agreement, dubbed the “Abraham Accords,” in 2020.
Phoenix Group, one of the largest financial firms in Israel with a market capitalisation of around $2.8 billion, is a provider of multi-line insurance, asset management, investment and financial services.
Its Tel Aviv-listed shares were down 3.1% in afternoon trading and down 7.4% this year. But they gained 65% in 2021 after double-digit gains in the prior two years.
A source familiar with the deal said ADQ had been doing extensive due diligence for months and that since Emirati investors are comprehensive, “they wouldn’t sign if they thought the chances are low.”
ADQ is buying into the Phoenix name, and the rationale that it can make a good return on its investment, the source said, which has been enabled by the Israel-UAE normalization and expected to lead to more deals.
“Since Gallatin and Centerbridge entered Phoenix a few years ago, Phoenix has become more international and in the way we actually behave,” the source said, adding that it was likely that Centerbridge would have needed to sell soon since their fund was “ending its timelife.”
Private equity firms generally seek to exit their investments five to seven years after buying in.
ADQ’s venture capital arm DisruptAD, along with a fund managed by US-French private equity firm L Catterton, in July led a $105 million investment round in Israel’s Aleph Farms, a lab-grown meat start-up firm.
($1 = 3.4034 shekels)
(Reporting by Hadeel Al Sayegh and Steven Scheer, editing by Louise Heavens and David Evans)