Why Wi-Connect Missed Out on Altshuler Shaham Deal
The acquisition of Altshuler Shaham Finances by Wi-Connect Globaltech, the parent company of Ayalon Insurance, raises questions about Ayalon's missed opportunity. The deal would have significantly boosted Wi-Connect's presence in the pension and provident fund sectors, areas Ayalon itself had identified as key growth engines. Ayalon had recently re-entered the provident fund market, establishing a management company, obtaining a license, and rapidly attracting funds, aiming to make this a central pillar of its future growth.
Acquiring Altshuler Shaham Finances would have provided Ayalon with immediate access to a substantial operation managing approximately 150 billion shekels, bypassing years of organic development. Instead, Wi-Connect Globaltech is purchasing a 45% stake in Altshuler Shaham Finances for about 1.8 billion shekels, granting Wi-Connect joint control over a major Israeli savings institution. This places a large pension and provident fund operation alongside Ayalon, within a sister company directly under Wi-Connect Globaltech.
The regulatory structure, specifically Israel's concentration law, complicated Ayalon's direct acquisition. Wi-Connect Globaltech, Ayalon, and Altshuler Shaham Finances are all publicly traded companies. A direct acquisition by Ayalon would have created a three-tiered public structure (Wi-Connect above Ayalon above Altshuler Shaham), which is prohibited. By having Wi-Connect acquire Altshuler directly, Ayalon and Altshuler become sister companies under Wi-Connect, mitigating this specific regulatory hurdle.
This regulatory constraint leaves Ayalon's shareholders, particularly minority investors, questioning what compensation they are due for missing out on a strategic opportunity. While Ayalon might receive up to 10% of Altshuler Shaham Finances, offering some exposure to future growth, this falls short of the control, management influence, synergies, and distribution capabilities that a full acquisition would have provided. The article suggests that Ayalon's minority shareholders deserve compensation for this missed opportunity, especially since the controlling shareholder stands to benefit directly from Altshuler's growth, which now occurs outside of Ayalon.
Corporate governance is also a concern, with the article highlighting the responsibility of Ayalon's independent directors. They must ensure decisions are made in the best interest of Ayalon and its public shareholders, rather than solely benefiting the controlling shareholder, Wi-Connect Globaltech. The growing importance of Altshuler Shaham Finances within the Wi-Connect group raises questions about why this growth is happening outside Ayalon, particularly after Ayalon invested in building its own new provident fund operations.
