A few months ago she was amazing the phoenix the market with a deal to purchase 14% of the Meir Group, the car importer controlled by the Shahar family and the Vekaz family (also known as the owners of Maccabi Haifa). She paid approximately NIS 574 million in the transaction, an amount that gives the Meir Group a value of NIS 4.1 billion. In a rare interview, Hagai Schreiber, Phoenix’s chief investment officer, provides a behind-the-scenes look at the deal, which also left Phoenix with an option to purchase an additional 6% of the company in the future.
● From time to time not only insurance: will the purchase spree of the Phoenix reach the automotive industry?
● The Phoenix will purchase assets from Psagot in a deal worth NIS 310 million
● From the Phoenix to Isracard: what is hidden behind the flood of transactions that take place on the stock exchange
“The Meir deal shows the understanding that at our size we need to do big deals, and that we have the capabilities to do so,” he says. “At first we wondered if maybe someone in the management was sitting there because he was ‘the son of,’ but as we progressed in the deal, we were surprised to discover that the company is very organized with professional management. Meir are not only an importer of Volvo, as they may be perceived by the public, they also import trucks, and have Public transportation activities, leasing and financing. Add to that also excess real estate and you get a very decentralized and stable group.”
Hagai Schreiber
personal: 47 years old, lives in Tel Aviv, in a relationship with Tami and father to Mika (9) and Yotam (5)
professional: Prior to this position at Fenix, he served as the nostro manager and associate manager in the company
Something else: His father is the writer Eliyahu Schreiber (cats)
Opportunities in companies are over leveraged
The Meir deal is just one example of the moves made this year by Phoenix, Israel’s largest insurance company in terms of market value (NIS 9.5 billion) and the volume of funds under management – more than NIS 270 billion in long-term savings from colleagues, and a total of more than NIS 400 billion after completion The acquisition transactions of Epsilon and Psagot. In the interview, we asked to speak with Schreiber about the past year, the state of the markets and the challenges ahead.
What considerations are currently made before entering into investments?
“One of the major points of disagreement is how long this interest rate environment will remain. Until a few months ago, the market estimated that in May of this year interest rates in the US would begin to decrease. Now, he is starting to correct expectations that it will drop towards the end of 2023 but we think that will happen only in 2024. In any case, the yield of the interest rate is less important, but the length of time that the interest rate environment will remain high.
“The volume of private transactions that we do has decreased in recent months because the private market has not always adapted to the public market, which very quickly internalized the interest rate environment. As time passes and interest rates do not decrease, companies that entered this environment too leveraged will have to bring in partners or sell, and this is where opportunities will be created “.
Schreiber also provides examples: “Real estate companies, some of which have taken on many projects that require a lot of equity. This is also true for the world of energy and from a financial point of view this is the right place to be, and Phoenix will make such deals in the coming weeks.”
What about private investors?
“A private investor should invest in the general routes. They are very balanced and allow equity exposures of all types. Do not try to time the market but stay in it for years. It is a very efficient route also in terms of taxation.”
“Loss of interest in small and medium-sized companies”
Recently, the Bank of Israel and the Israel Securities Authority succeeded in raising the eyebrows of investment managers in the institutional bodies, following a study in which they claimed that the investment portfolios of the institutions were too similar. Schreiber also did not like this claim: “15 years ago, when the investments were almost all in the Israeli capital market that was Several series of government and corporate bonds and about 100 stocks, obviously there was a lot of similarity. But also the studies of the Bank of Israel and the Israel Securities Authority show that two strategic processes are taking place at the institutions. The first is going abroad and the second is an increase in non-tradable investments.
“By definition, the variance in these two components is much greater, and the longer these trends continue, the greater the variance will be. However, in the end we are measured every month, and we manage the money 80% according to what we believe, and 20% according to the competition.
“There is a loss of interest in small and medium-sized companies, with a value of NIS 500 million or less. As an institutional body that can only own up to 20%, we have no possibility of building a substantial position or trading in it, given the low marketability and the size of the company. Many such companies have taken a hit in the last six months, and some There are hidden opportunities for new players and even for existing controlling owners who want to increase control. In my estimation, this year we will see more and more acquisition and merger offers from controlling owners or from players in the field, as we saw this week with the purchase offer of Delta Golf,” Schreiber estimates.
The Phoenix is at the top of the yield table in almost all the products that exist in the market in pension, provident and especially in the executive insurance products. How do you deal with expectations?
“It is very difficult to be in first place without taking corners (targeted investments, often at high risk, Rao). I don’t know any better what the Fed will decide or what the S&P will do. We know how to work hard, to make a balanced allocation.”
The Ministry of Finance now wants to reduce the public’s exposure to those profit-sharing policies, known as executive insurance. In the Arrangements Law, which will be discussed in the Knesset next week, there is a section that imposes restrictions on the managers’ insurance, with the aim of transferring the public to the pension funds, where the management fees are lower.
Schreiber: “In addition to participating in the profits, individual savings policies are also a super high-quality tool for managing excess funds. True, a provident fund for investment is also an excellent tool, but it is limited in the deposit amounts. Those who have spare money can put it in these policies, benefit from tax deferral and a diverse portfolio In the tradable and non-tradable world, in Israel and abroad, and with very reasonable management fees. I put my money in this product, and with us about 80% of the money in the general route is not classic executive insurance but free money management.”
Hagi Schreiber and the Phoenix team / Photo: Kadia Levy
The Abu Dhabi deal: “There will be no interference”
But the Phoenix is not only on the buyer’s side. This week marks three months since the two American funds that own it, Centerbridge and Gallatin Point, surprised the Israeli capital market when they signed a memorandum of understanding to sell control to the ADQ investment fund owned by the Abu Dhabi government. With the announcement of the agreement, concerns began among investors and also among the public regarding the future of the members’ funds.
But the Phoenix is not only on the buyer’s side. This week marks three months since the two American funds that own it, Centerbridge and Gallatin Point, surprised the Israeli capital market when they signed a memorandum of understanding to sell control to the ADQ investment fund owned by the Abu Dhabi government. With the announcement of the agreement, concerns began among investors as well as among the public regarding the future of the members’ funds.
Schreiber asks for reassurance. “They have no intention of interfering, just as our current investors did not interfere for a moment in the investments of the partners or Nostro, and as mentioned, it is also completely clear to the people of the fund. If this were not the case, then neither the CEO, nor the investment committee, nor I would stay. I didn’t get even the slightest sense that they were looking to interfere other than opening doors for us. Today, we are strongly going abroad and these acquaintances and connections are very important.”
So you tell my Phoenix colleagues they can sleep easy?
“Yes”.
Where does the deal stand now?
“As part of the due diligence that the fund does, we were in Abu Dhabi a number of weeks ago for a series of working meetings during which I presented the investment chapter. ADQ’s advisers and investment managers were there and we met very professional, very educated and very matter-of-fact people and the meetings were very good. They are in the final stages of the legal inspections , professionalism and accounting, and from here it moves to the regulatory field. During the last period since the announcement, I have received many messages from the most respected bodies in Israel and the world who are already working with the fund and they had only good things to say about the fund.”
What do you think the fund from Abu Dhabi is looking for by investing in Phoenix?
“The fund searches for and makes long-term investments all over the world after testing and analysis processes. With the signing of the Abraham agreements, they also had an opportunity to increase their direct investments in Israel and I am happy that they are doing this and chose Phoenix as one of their first and essential investments. For them it is a good and stable investment, for us For Phoenix, it’s an opportunity to get a shareholder with a long-term vision, and for the country, it’s an opportunity to open up to another variety of investors and strengthen ties with our neighbors.”
The Israchart-Harel deal: a bet
One of the hottest areas now in the capital market and among insurance companies in particular, is the credit card companies. Your competitor Harel this week signed a binding agreement to purchase Isracard for approximately NIS 3 billion, and another competitor, Clal, is acquiring Max for a value of approximately NIS 2.5 billion.
“The insurance companies want to build an arm that is less correlated to the capital market, and this is the right direction for them. At the same time, our models show that the deal signed this week (Haral-Yishrachart) reflects the full price of a financial transaction, and in order to justify it, the company needs to grow very quickly and optimize it. From here on out It’s already considerations like how important it is for one company to have a credit card company and another not, and how much synergy there will be with the insurance company, and each group CEO will have to decide how much value he places on that. We will only find out the results of the bet in a few years.”
The third credit card company will be separated from Discount in 3-4 years. Are you actually saying ‘let’s see the results of the Isracard purchase and then decide whether to purchase Kal and at what price’?
“There is a perception in the market that the last bride will be the most rivaled. You have to remember that the grooms who can purchase her are also very few.”
In recent weeks, the country has been in turmoil over the changes in the judicial system that the new government seeks to promote. Senior economists, along with foreign investment banks, warn of damage to Israel’s credit rating, and that foreign investors will withdraw their money from here. The CEO of Phoenix, Eyal Ben Simon, was one of the few who said in a conversation with Globes that he had not yet heard warnings of this type from investors with whom he is in contact.
Schreiber now says similar things. “Despite the volatility and the underperformance compared to the rest of the world, we do not detect panic or foreigners taking out money in a hurry. Right now it is more Israelis who buy dollars just before they think foreigners will buy dollars, or sell bonds and stocks just before the foreigners sell. But yes, at the macroeconomic level, every day that passes has a slow and cumulative negative effect. Will those who sit on the fence think twice about investing in an Israeli start-up, even though it’s not an easy time for them? Probably so”.