Clal Insurance fails to sell US unit Guard

The parties could not agree on a second extension of the talks, which began last April.

By RON STEIN/GLOBES
Clal Insurance Enterprises Holdings Ltd. failed in its second attempt to sell its US insurance subsidiary Guard Insurance Group Inc.
The parties could not agree on a second extension of the talks, which began last April. However sources at Clal Insurance say that the talks could be resumed, and that parallel talks will be opened with other parties.
Sources at Clal Insurance added that the negotiations were not finalized because the potential buyer asked for a large reduction in price. The company believes that Guard is in good shape and that there is no need to lower its asking price further.
The period that Clal Insurance gave the potential buyers of Guard to complete due diligence and sign a detailed contract expired on Friday. The deadline passed, even after Clal Insurance granted the buyer an extension beyond the original 45 days that the parties agreed to in the letter of intent.
This is the second time that Clal Insurance has tried to sell Guard. In August 2011, it was in talks to sell Guard to Employers Holdings Inc. for $312 million, but no deal was struck.
As part of efforts to realize value and generate cash by Clal Insurance’s parent company, IDB Holding Corp. Ltd., controlled by Nochi Dankner – alongside Clal Insurance’s own efforts to close its non-Israeli operations – in early April, the insurance company announced that it signed a non-binding letter of intent to sell its entire holding in Guard for $218m. and the release of a $54m. loan guarantee for Guard.
Guard mainly provides employee compensation insurance. Clal Insurance acquired the company in May 2007 for $112m., and subsequently invested $8m. in the company and injected $10m. capital into it. In May 2010, Clal Insurance paid Guard’s previous owners an additional $25m. Altogether, it has invested $155m. in Guard.
Meanwhile, IDB has put Clal Insurance itself up for sale. IDB must sell the company within a few years, in view of the Committee on Concentration in the Economy’s recommendations.
Last year, IDB failed to sell Clal Insurance to pan-European private equity fund Permira Funds.
Clal Insurance’s share price fell 2.4 percent in early trading on the TASE Monday to NIS 51.03, giving a market cap of NIS 2.8 billion.