Phoenix, Migdal, and Harel Join Generation Fund in Acquiring Shikun & Binui Energy

Phoenix Insurance, Migdal, and Harel have joined PowerGen, the energy arm of the Generation Fund, in acquiring Shikun & Binui Energy. Generation announced it signed an agreement with Phoenix granting it 12.4% of PowerGen's shares, valuing the company at 3.25 billion shekels. Concurrently, the fund signed memorandums of understanding with institutional investors Migdal and Harel, who plan to invest between 500 and 800 million shekels, contingent on completing the Shikun & Binui Energy acquisition.

Phoenix will receive shares by exercising options from its previous investment in PowerGen, repaying loans to PowerGen subsidiaries, and selling preferred shares it holds. The 3.25 billion shekel valuation applies before adding Shikun & Binui Energy's operations. Migdal, Harel, and likely Amitim (pending a memorandum) will join after the acquisition closes, with their share allocation reflecting a combined post-merger valuation of approximately 7.7 billion shekels.

The deal also restructures Phoenix's preferred shares issued in 2024, which provided fixed returns and options to buy ordinary shares but no voting rights. Phoenix will sell these preferred shares back to Generation for a net 187 million shekels after option value adjustments, simplifying PowerGen's capital structure ahead of new investors. Generation is also exploring adding further institutional investors beyond those with signed memorandums.

The valuation in the Phoenix deal is about 850 million shekels higher than PowerGen's book value on Generation's records, which stood at roughly 2.4 billion shekels at the end of March. Generation expects a pre-tax profit of 270-320 million shekels in Q2 from this transaction. The entry of Phoenix and other institutional investors forms part of the financing package for acquiring Shikun & Binui Energy.

Generation prepared for the acquisition over recent months by raising about one billion shekels from major institutional investors and by divesting its stake in British rail company Porterbrook for around half a billion shekels. The fund holds approximately 1.8 billion shekels in cash and credit lines, maintains leverage below 10%, and believes it can issue additional bonds without affecting its current credit rating. The investments from Phoenix and other institutions are expected to complete the necessary funding for the Shikun & Binui Energy purchase.