Italian insurance group Generali will be selling its Israeli subsidiary Migdal to Shlomo Eliahu, founder and controlling shareholder of Eliahu holding for EUR835m, as part of the group’s broader strategy to depart maturing markets and invest in regions such as Eastern Europe and Latin America.
As per the agreement, Eliahu will acquire Generali’s entire 69.1% holding in Migdal, which is still subject to regulatory approval.
Commenting on the deal, Generali said that the transaction should generate a capital gain of approximately EUR103m on a consolidated basis.
The Italian group further added that the gain would improve its solvency ratio by 2.4 points.
Eliahu holding controls significant stakes in the Israeli banking and insurance sector and owns a 9.59% stake in Bank Leumi as well as a 27.12% share in Israel’s Union Bank.
The Israeli government has earlier proposed to force holding groups to separate into financial and non-financial companies in a bid to weaken the predominance of small number of family-controlled holding groups in the economy.
Migdal reported a net loss of NIS5.8m for the third quarter of 2011 while Generali reported losing EUR1.8bn in the first three quarters of 2011.
Founded in 1934, Midgal is the first insurance company that established a non-trade union pension fund and is held by the public company Migdal Insurance and Financial Holdings, whose shareholders as of December 2008 are Generali 70%, Bank Leumi 10% and the public 20%.
Generali, established nearly 180 years ago, manages assets worth EUR406bn, with 86,000 employees and 331 companies worldwide.