The past year was not easy for investors, to say the least. Even if the leading indices of the Tel Aviv Stock Exchange ended 2022 with a relatively low negative return in the world, of about 10%, the upheavals experienced by the market during the period made it difficult to navigate the investment portfolio to a safe haven.
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Now it turns out that the stakeholders in the companies traded in Tel Aviv have also changed their ways. Usually, in a year of sharp declines in the markets, they prefer to reduce the realization of shares, and take advantage of the opportunities created in the market to increase their holdings in companies, as a way of expressing confidence. But that was not the case in 2022.
A summary conducted by the research unit of the Tel Aviv Stock Exchange, under the management of Kobi Abramov, shows that in 2021, when the leading indices climbed by a good rate of more than 30%, the stakeholders in public companies sold shares worth NIS 7.7 billion, and on the other hand bought shares worth NIS 3.3 billion . In 2022, a surprising development was recorded.
While due to price declines the sales of shares by interested parties were indeed reduced to NIS 6.4 billion, i.e. a 17% decrease compared to the volume of sales in the previous year, the purchases by interested parties also decreased to approximately NIS 2.6 billion, a sharper decrease of 21% compared to purchases in the year previous
The stock exchange offers a partial explanation, according to which, due to the increase in the number of large listed companies without a core of control (that is, those held mainly by institutional entities), the connection between the market trend and the activity of the stakeholders is weakening, a trend whose buds were seen as mentioned last year. This is because the considerations of stakeholders in companies without a core of control – as mentioned mainly institutional bodies – are different from those of the controlling owners.
The reduction in purchases by interested parties this year, they continue to say in the stock exchange, may also be explained by the large amounts of purchases made in previous years, which were unusual due to a number of large control struggles. Thus, this year also featured significant purchases made as part of the consolidation of control of the real estate company Brack Capital, which operates in Germany, and the control struggles in Norstar (Chaim Katzman vs. Israel Canada) and Paz Neft.
Another explanation for the decrease in the volume of purchases by interested parties may come from the sharp increase recorded in interest rates last year, which makes taking out credit for purchase transactions more expensive than before.
Be that as it may, the rate of public holdings rose at the end of the year to about 61.5% of the Tel Aviv stock market, compared to about 60% at the end of 2021. However, it should be noted that at the end of 2020 the rate of public holdings was at a higher level – 64% of public companies.
The reason for the sharp decline in 2021 was the delisting of the flavor and fragrance giant IFF, which purchased Frutarom in the previous decade and decided to leave the Tel Aviv Stock Exchange.
The most prominent sales: for the purpose of a break or to strengthen control
The stock exchange data on transactions by interested parties do not include sales by interested parties to other interested parties – sales that did not increase the proportion of public holdings, sales through tender offers or purchases through tender offers.
The most prominent sales in the past year by the interested parties were within the framework of ceasing control of the listed companies or strengthening their control, and in the first place was the sale of the shares of the geothermal energy producer Orim by the Japanese company Oryx.
Last November, Oryx sold, for the first time since acquiring control ofOrmat In 2017, over a third of its holdings (about 7.7%) were part of a sale offer in the US. The value of the shares sold was 1.3 billion shekels, and Oryx has a remaining holding of about 12% in the company.
Also the billionaire Sherry Arison, former controlling owner ofBank Hapoalim , continued last year to sell its shares in the bank. This after in 2021 Arison sold 7.8% of Hapoalim’s shares in April and December in exchange for NIS 2.9 billion, and then its control permit from the Bank of Israel formally expired.
Sherry Arison / Photo: Eyal Yitzhar
Arison became a “regular” stakeholder. What played in its favor was the impressive defensiveness of the banking sector. The bank index fell “only” by 4% last year, half of the negative return recorded by the Tel Aviv-35 index, but in the previous year (2021) it jumped by 68%. Last year Arison realized a 2.3% share of the bank’s shares, which she sold in exchange for -1.03 billion shekels After the realization, she owns 5.6% of the bank’s shares.
In another transaction of overseas shareholders, the foreign fund “Third Point” recorded a significant sale of shares in March. The fund liquidated its holdings in the energy company Energian which made up 9.3% of the company’s shares, which, among other things, produces natural gas from the Harish reservoir in the Mediterranean Sea.
Third Point sold the shares for NIS 777 million, and Energian’s CEO, Matthews Riggs, also realized a large share of the company’s shares, when he sold 2.8% of Energian’s shares in June, worth about NIS 254 million.
Energian CEO, Matthews Riggs / Photo: Eyal Yitzhar
Society for Israel which is controlled by Idan Ofer, also sold a considerable amount of shares last year, in its main holding, the Fertilizers and Chemicals Company I.C.L (formerly ICL). This is a share of 1.6% of ACL shares, which was sold for approximately NIS 726 million. After that transaction, the Israel company owns 44% of ICL shares.
Prominent acquisitions at Brac Capital, Paz and Norstar
On the purchase side, the German real estate concern LEG stood out, having purchased approximately 26.6% of shares Brack Capital which deals in profitable commercial and residential real estate in Germany, with a value of about one billion shekels.
After the transaction, LEG reached a holding of approximately 35.7% in the company. Following the purchase of LEG, the current controlling owner of Brack Capital, the German Adler, remains with a share of 63% of its share capital. The rest of the investing public has a minimal share of the company – only 1.3% of its share capital.
The yielding real estate company Summit controlled by Zohar Levy, became an interested party in January 2022Paz oil which is a company without a controlling interest but one that arouses quite a bit of interest among various candidates for its acquisition.
Last year, Summit bought approximately NIS 528 million worth of shares in Paz, perhaps in order to benefit from the improvement in the value of its investment in the future, as it did in the past in the Mebane real estate group. Summit became the largest shareholder in Paz, and it holds approximately 9.8% of its shares.
Zohar Levy, Baali Samit / Photo: Yeh’ach
Large purchases and sales by interested parties were also triggered by the instinctive control struggle that took place in the first months of last year in the company Norstar which controls the mall company G City (formerly Gazit Globe) under the management of Haim Katzman. Katzman’s control of the global giant was challenged by the real estate company Israel Canada, controlled by Barak Rosen and Assi Tuchmeyer.
Israel Canada purchased Norstar shares on the market worth approximately NIS 102 million, and this is in addition to shares worth approximately NIS 192 million that she later purchased from Katzman himself (a transaction between interested parties, which, as mentioned, does not appear in the stock exchange data).
After the purchases, Israel Canada came to own 22% of Norstar shares. Apart from her, also the retail and real estate tycoon Rami Levi He became an interested party in Norstar last April, and he owns about 5% of the company’s shares, which at the time were worth about NIS 85 million.
Later in the year, Norstar and G City got into financial trouble, due to the increase in interest rates and the heavy debts they were saddled with, which led to the freeze of Israel Canada’s takeover attempt of the company, and to an avalanche in the shares of both companies, whose bonds they issued rose to a double-digit yield.
Haim Katzman / Photo: Yossi Cohen
In another prominent transaction last year, the company acquired the commercial centers Big Shares in the yielding real estate company Epic Properties worth about NIS 114 million.
This transaction was carried out in addition to the purchase of shares worth NIS 277 million by Big in a public offering conducted by Efi Properties. After the two purchases, which accounted for about 2.6% of the company’s shares, Big owned about 66.4% of Efi Properties. Later, Big made a tender offer for the shares of Efi Properties, increasing its holding to approximately 85%.
The person who joined the celebration of the purchases at Effi Properties is mega light the yielding real estate company controlled by Tzachi Nahmias, which also owns the investment company Discount Investments (DSKSH).
It purchased Efi Properties shares for NIS 87 million, which constituted about 13% of the company’s shares. Mega Or sold the shares later this year as part of its response to Big’s takeover offer.