China’s Fosun Scraps Plan to Buy Israel’s Phoenix, Vowing More Prudent Strategy

February 17, 2016

Chinese conglomerate Fosun International Ltd.’s deal to acquire Israeli insurer Phoenix Holdings Ltd. for more than $460 million has unraveled, the firm’s second withdrawn overseas purchase in the past two months as it pledges a more prudent investment strategy.

Fosun, headed by billionaire Chairman Guo Guangchang, said it agreed to terminate the share purchase agreement as certain conditions haven’t been fulfilled or waived, according to a Hong Kong stock exchange filing Wednesday. Israeli regulators in December had halted the approval process for the acquisition after Guo was reported as assisting Chinese authorities in an investigation, local media Calcalist reported at the time.

The termination of the deal follows Fosun’s decision in December to withdraw its offer for Anglo-German banking group BHF Kleinwort Benson Group.

Fosun will be more cautious in selecting new investments to ensure its financial health, and will adhere to a “prudent” investment strategy, Kate Zhao, the company’s New York-based public relations manager, said Wednesday in e-mailed statement.

“In view of the current overall market situation, Fosun will focus on the management and integration in invested projects and be more cautious in selecting new investment,” Zhao said in the e-mail. “Fosun is putting greater emphasis on strengthening its financial structure and attempts to rationalize the Group’s debt level.”

Sprawling Conglomerate

Fosun was to buy the Phoenix from Delek Group Ltd., Israel’s largest energy company that is seeking to dispose of businesses unrelated to developing natural gas. Fosun shares fell 1.1 percent to HK$10.40 on Wednesday in Hong Kong, bringing its decline so far this year to 14 percent. Delek shares slipped 1.1 percent in Tel Aviv.

Guo, whose sprawling conglomerate has spent more than $5.7 billion acquiring insurance assets over the past two years, has modeled his company on the principles of Warren Buffett. The Chinese investment giant owns stakes in Club Mediterranee SA and Greek jewelry brand Folli Follie, as well as a stake in Cirque du Soleil Inc.

Guo has made public appearances and has been signing company filings as chairman since late December, suggesting that he has resumed normal business activity. Yet, the chairman’s public appearances after being reported missing failed to fully dispel concerns about the company, analysts said in December after the Phoenix’s sale process was protracted.

Shanghai Probe

Guo was assisting with an investigation into former Shanghai vice mayor Ai Baojun, people familiar with the situation said in December. Ai was “suspected of severe violations of party discipline,” the Central Commission for Discipline Inspection said earlier, using language that often refers to corruption probes.

Fosun invests in financial assets such as insurance companies to secure long-term funding that can be deployed to expand across a range of businesses. The insurance businesses, such as Portugal’s Cia de Seguros Fidelidade Mundial SA and Bermuda-based Ironshore Inc., provide low-cost financing for acquisitions in other industries.

The conglomerate will slow down a global buying spree over the next two years as the company seeks to consolidate its businesses and work to reduce its debt level, Guo said in a September interview in Shanghai. The firm, which snapped up insurers, banks and fashion companies abroad, will still look for new investment opportunities, but will shift its main task to focus on what it has “already established,” Guo said in the interview.

In an effort to reduce leverage, the firm raised $1.5 billion in a Sept. 10 rights offering. Fosun will sell off some real estate assets and equities around the world as prices have climbed to a “satisfactory level,” while the scale won’t be massive, Guo said last year.


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