Israeli Adviser Urges Caution on Sale of Insurers to Chinese

(Bloomberg) -- A senior adviser to Israel’s finance minister cast doubt on the benefits of Chinese acquisitions of local insurance companies, four months after Fujian Yango Group Co. agreed to buy Israel’s Phoenix Holdings Ltd. in a deal that’s still awaiting regulatory approval.

While Chinese companies can add value when they buy Israeli industrial assets, bringing their own expertise in manufacturing and global trade, “it’s not clear what benefits” they could provide to managing pensions, Maharan Frozenfar, chairman of Finance Minister Moshe Kahlon’s advisory committee, said in an interview. He stressed that he wasn’t ruling out a deal and that such scrutiny would be applied to foreign investors in general.

Previous Chinese attempts to buy Israeli insurers have foundered, and Frozenfar’s comments suggest the government is in no rush to approve Fujian’s acquisition of Phoenix either. Phoenix’s parent company, Delek Group Ltd., has to sell its insurance holdings under a law limiting cross-ownership of industrial companies and financial assets, and has received a 1.95 billion shekel ($512 million) offer from the Chinese holding company.

An agreement was signed in August and the deal is now under the review of the Finance Ministry, which has the final say over its fate. Representatives of Fujian Yango weren’t immediately available for comment while Delek spokesman Itay Gore declined to comment.

“The Israeli government needs to put in the kind of parameters that will make sure our pensions aren’t put at risk,” Frozenfar, a former Israeli military budget director, said in Tel Aviv. “Then it’s up to the buyers to accept those terms.”

Two Chinese offers for Israeli financial assets have already fallen through. Fosun International Ltd. bid for Phoenix in 2015, but regulators held up that agreement after the Chinese company’s chairman disappeared, and the deal was called off in February. Macrolink Holding Company Ltd. walked away from talks to buy Clal Insurance Enterprises Holdings Ltd. in January, saying it wasn’t confident of receiving regulatory approval.

Shares in Phoenix fell 0.2 percent to 13.47 shekels while Delek dropped 0.1 percent at 4:02 p.m. in Tel Aviv.

The Chinese have had better luck investing in Israeli manufacturing and technology, though not without encountering some political opposition. Bright Food Group Co. purchased the majority stake in Tnuva Food Industries Ltd., Israel’s largest food manufacturer, in 2014, over the objections of opponents who said it would jeopardize the country’s food security.

Frozenfar said Chinese companies that want to invest in industrial companies and infrastructure projects are “very welcome.”

“In this regard, they offer lots of know-how and experience,” he said.

--With assistance from Zhang Dingmin

To contact the reporters on this story:
David Wainer in Tel Aviv at dwainer3@bloomberg.net
Yaacov Benmeleh in Tel Aviv at ybenmeleh@bloomberg.net

To contact the editors responsible for this story:
Alaa Shahine at asalha@bloomberg.net
Dale Crofts at dcrofts@bloomberg.net
Amy Teibel