Israeli government said to oppose China purchase of insurers

[TEL AVIV] Israel's Finance Ministry opposes the sale of insurance companies to Chinese investors because it's hesitant to put pension money in their hands, a senior government official said, a stance that could bode ill for Fujian Yango Group Co's bid to buy Israel's Phoenix Holdings Ltd.

Many Chinese investors don't bring clear advantages to the table in managing savings because they don't have well-established track records, the official said, speaking on condition of anonymity to discuss ministry policy. At the same time, he didn't rule out exceptions, saying proposed deals would be examined individually.

The government is more inclined to approve Chinese investments in industrial assets, where pension money is not at risk, he said.

Chinese investors have been the primary bidders for Israeli financial assets being sold under a new law limiting cross-ownership of industrial and financial companies. Fujian Yango agreed to buy Phoenix five months ago for 1.95 billion shekels (S$730 million), and Finance Ministry approval is required for the transaction to go through.

Government opposition to Chinese investment means Israeli holding companies such as Phoenix's parent company, Delek Group Ltd, may have a hard time selling their financial assets. Even after a rally, Delek's Phoenix stake is worth 1.67 billion shekels, some 14 per cent less than Fujian Yango's offer.

Representatives of Fujian Yango weren't immediately available for comment. Delek spokesman Itay Gore declined to comment.

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 last February.

Macrolink Holding Company Ltd walked away from talks to buy Clal Insurance Enterprises Holdings Ltd last January, saying it wasn't confident of receiving regulatory approval.

One alternative for investors such as Delek would be to dispose of their stakes on the bourse, the government official said.

The Chinese have had better luck investing in Israeli manufacturing and technology, though there too they have faced political opposition. Bright Food Group Co purchased a majority stake in Tnuva Food Industries Ltd, Israel's largest food manufacturer, in 2014, over the objections of opponents who said it would jeopardise the country's food security.

Israel's Calcalist newspaper reported Monday that Tnuva would cut 550 employees. According to the company's website, Tnuva employs about 6,500 workers.

BLOOMBERG