At the end of many months that included exchanges of sharp and angry letters, a shareholder vote was held on Wednesday that will shape the face of Clal’s board of directors for the years to come.
● Alfred Akirov sharpens the opposition: the purchase of Max – Zoya, lowers the value of Clal Insurance to the floor
● The Capital Market Authority prohibits Akirov from acquiring control at all through Alrov
The cases where changes in the board of directors immediately affect such a significant transaction are rare, but this is what is happening now in general, while the deal to purchase the Max credit card company is on the table, according to a value of almost NIS 2.5 billion. In total, you will have to pay 1.6 billion shekels in cash and shares, a third of the value of the insurance company.
When the smoke cleared, and the results of the shareholders’ vote were published (which was postponed a week at the request of the Securities and Exchange Commission), it became clear that the shareholders gave Chairman Clal Haim Samet and CEO Yoram Neve, who pushed for the Max deal, Ruach Gabit, and elected Samet for another term as a director, and almost Certainly also for another term as the chairman of the company, which will allow the closing of the deal – to protect the heart of Alfred Akirov, who is trying to torpedo her, and who asked to replace Samet with a candidate on his behalf.
This despite the fact that the supporters of the deal lost the absolute majority they had before the vote; The director Varda Elshich was not re-elected, and the board was joined by Aharon Vogel, proposed on behalf of Akirov’s Alrov Real Estate Company, the largest shareholder overall (15%) opposing the Max deal, and Muki Abramowitz, proposed on behalf of another shareholder, Eyal Lapidot (formerly CEO of the Fenix insurance company and the Shikhun and Binui infrastructure company).
The two new directors join Meli Margaliot and David Granot who voted against the deal, and now there is a tie of four supporters versus four opponents. By Samet’s side are Mia Likvarnik (independent director) as well as the two external directors Yair Bar-Tov and Shmuel Schwartz.
Despite the tie on paper, the shareholders’ vote brings the deal closer to closing, due to the advantage of Chairman Samet’s vote. If he had not been elected on Wednesday, there was a good chance that one of the candidates from Alrov, Vogel or Garnot, would have been appointed chairman the board of directors.
Assuming that one of them will offer his candidacy even now against Samet’s, the two candidates will go to a vote that is also expected to end in a tie of three against three, and to replace an incumbent chairman a majority is needed, and Akirav does not have such a majority now.
A majority to cancel the deal is probably not possible
If we return to the question of the Max deal, it has already been signed, and it is generally believed that now, after the shareholders’ vote, they will be able to complete it on the scheduled date, that is, by the end of February.
As mentioned, Clal’s board of directors has already signed it, and in order to violate the agreement with the Warburg Pincus investment fund that controls Max, a majority of the board is needed, which as mentioned is apparently not possible, certainly without a push from the chairman, who in this case is one of the biggest supporters of the transaction and sign it.
That is, if equality had been achieved before the signing of the transaction, it is possible that Samet and Noah would have had difficulty passing it on the board of directors, but now in order to reverse it, active action within the board of directors is necessary, the practical chance of which will occur is zero.
Although on the face of it Fogel was proposed on behalf of Alrov, and Abramovitz on behalf of Lapidos, these are veteran insurance people who will vote according to their discretion, and market factors estimate that they can still surprise and support the deal.
The same sources mention that Samet himself was first elected to the general board of directors as a candidate on behalf of Alrov, while Likwernik and the late Roni Maliniak, who died during his term as a director, were elected on behalf of Mori Arkin (who was suspected in the past of trying to oust Noah), and on behalf of Lapidot, respectively.
“Clal’s board of directors embarks on a new path”
Balerov are expected to continue to oppose the deal and do not intend to give up. “The shareholders voted in favor of a change: the Clal board of directors is embarking on a new path, backed by a significant increase in the strength of experienced directors with relevant expertise in the core business, who will work for the benefit of the company and all shareholders,” Malerov said the morning after the vote.
Alrov, who is trying to acquire control of Clal and is waiting for many months for the answer from the Capital Market Authority regarding obtaining a permit to do so, claims that the Max deal is too expensive and does not match Clal’s business strategy.
Many in the capital market expected that in light of the deterioration of macroeconomic conditions since the deal was signed, and the expected slowdown in credit activity, there would be a downward change in Max’s pricing, but this did not happen.
On the other hand, they claim that precisely in such a period of volatility in the markets there is a necessity to generate a source of income that does not depend on the capital market, and that Max’s business results justify the price.
Alrov can apply to the court in order to issue injunctions for the transaction to take place, but the chances that the court will respond to this are low, and the matter has already been checked with legal experts. This is, among other things, due to the long period of time that has passed since Alrov became aware of the deal, in April of last year, and this has legal significance.
However, the real estate company can also apply to the High Court regarding its obligation to request and receive a liquidation holding permit, the permit required of any interested party (holding 5% or more of the shares) in the company purchasing the credit card company.
In general, they have already submitted an application for a permit to control Solek from the Bank of Israel (unlike its holding permit, Alrov is required, as is Shalom Shay’s Dona Real Estate, which owns 5.2% of Clal’s shares), and it is expected to receive the answer in the coming weeks.
If and when such a permit is obtained for Clal, Elrove will be obligated to obtain the holding permit. In the event that she does not apply for such a permit, or is rejected by the Bank of Israel, the Bank of Israel may impose sanctions on her.
In the event that the same sanctions are imposed, Elrov will be able to turn to the High Court and request relief that it will stop the transaction on the grounds of a serious violation of his property rights. However, the chances of success of such a measure are unclear, since the regulator, the Bank of Israel, has already examined the transaction broadly and granted a control permit In general, while examining, among other things, the issue of shareholders in the insurance company.
The double hat of the institutionalists
Clal is a company without a core of control, therefore the decision of the shareholders to award Samt and Neve a victory on points, and not decide a knockout for either side, illustrates the problematic nature of this structure.
Alrov and Dona Real Estate together own about 20% of Clal’s shares, but a larger holding is held by a number of institutional entities together. Harel and the Phoenix each own about 7.2% of the shares, and Menorah Mivathim, Migdal and the Investment House each own almost 4%.
These are competing bodies in general, which in the end indicate how the face of the company will look and where it will turn. From a business point of view, it is good for them that the leadership of Clal will continue to invest energy and financial resources in the fight against Alrov, reserves that Clal would be happy to invest in further business development. On the other hand, it is the money of their peers, which should yield a positive return, and therefore Clal’s success is important to them.
In addition, if Clal eventually succeeds in completing the purchase of Max, it will signal to the other insurance companies that taking over a credit card company is a real possibility, especially when one of those companies, such as the one controlled by Discount Bank, is expected to go public soon.