Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • Changi Airport Group
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • BCC Partners
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek International Pte. Ltd.
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • Kazakhstan Potash Corporation Limited
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V. (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • TMI Associates (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Jurie Advokat AB (Sweden)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Monthly Archives: December 2017

ISRAELI UPDATE – Israel’s Anti-Concentration Law: An Opportunity for New Players

Contributed By: Shirin Herzog, Ron Gazit, Rotenberg & Co.

Editors’ Note: Contributed by Shirin Herzog, head of the Mergers and Acquisitions, Securities and International Transactions Department in the Israeli firm of Ron Gazit, Rotenberg & Co. Ms. Herzog handles a variety of Israeli and cross-border merger and acquisition transactions, for public and private companies, and private equity transactions. This post is based on a recent blog post by Ms. Herzog first published in The Times of Israel on November 30, 2017.

As we conclude the contested law’s first phase, its widespread impact is felt on the Israeli market

Known from ancient times as a land of milk and honey, nowadays the nation of Israel is also a nation of opportunity. The law commonly referred to in Israel as the “Concentration Law,” requires investors deemed to be overly concentrated in the Israeli market to sell or take other actions regarding prime assets. By the same token, these investors may also be restricted from acquiring further Israeli assets. While some existing players in the Israeli market (mostly Israelis) may be harmed by the law, it has created significant opportunity for new players.

In the four years since the law was enacted, we have witnessed a considerable number of transactions driven by its requirements.

The law set up a few milestones, the first is December 10, 2017, by which Israeli conglomerates having multiple layers of publicly-traded subsidiaries (legally existing structures, also known as “pyramids”) must be flattened to a maximum of three layers of public companies; by way of sale, going private, redemption of public debt, merger, etc.

The last conglomerate to comply with this requirement was the IDB Group. On November 22, 2017, just days before the deadline, IDB Development sold its controlling interests (71%) of Discount Investments to a private company held by Eduardo Elsztain, who is also the controlling shareholder of the IDB Group. Accordingly, Discount Investments remained a publicly-traded company, but became a sister company of IDB Development, instead of its subsidiary – removing one public layer at the pyramid’s top.

Those who closely follow the Israeli financial media surely know there’s nothing like IDB to kindle populist debate and criticism of politicians and journalists alike. This deal was no exception. Many argued that the deal’s structure and financing breached the Concentration Law’s letter and spirit, and some even called for legislation of deal-blocking regulations. I have a different take on this situation. A thorough analysis of the Concentration Law (formally, The Law for Promotion of Competition and Reduction of Concentration of 2013), together with its explanatory notes, leads me to conclude that the deal breaches neither the law nor its spirit. The specifics of the analysis deviate from the scope of this piece, but in a nutshell, the provisions relating to pyramid-flattening cover only the number of public layers and they do not restrict transactions within a conglomerate that meet this number of layers criterion. Unlike the other components of the law described below, neither separation of assets held nor concentration considerations apply. Moreover, any legislation restricting the manner of doing business should be interpreted narrowly and should not apply retroactively.

The Concentration Law has already significantly succeeded in reducing the number of layers in many Israeli public-companies’ pyramids. According to a study conducted by the Israel Securities Authority, as of September 2017, only 13 companies kept the third to fifth layers of pyramids, compared to 67 such companies upon commencement of the preparatory process of the Concentration Law’s legislation in 2010. The IDB Group, a perceived catalysator of the law, had seven such companies in September 2017, compared to 27 in 2010. The recent IDB deal reduced a layer at the top of the pyramid, turning four “third-layer companies” into “second-layer companies,” no longer restricted by the Concentration Law. Thereafter, IDB still has three companies in the pyramid’s third layer.

The second milestone under the law is only two years away. By December 10, 2019, pyramid structures should be further flattened to no more than two layers of public companies. By that deadline, another component of the Concentration Law also becomes effective. It relates to separation of cross-holdings of mega Israeli financial companies (generally, companies managing assets exceeding NIS 40 billion; US $11.4 billion) and mega Israeli “real” (namely, non-financial) companies (generally, companies having revenue or debt in Israel exceeding NIS 6 billion; US $1.7 billion).

Two years may seem like a long time, but it is not. Considering the market conditions, the harsh sanctions on a breach (forced sale by a trustee) and the precedents in recent years, especially in the regulated insurance space, selling such assets could take a long time – and no seller wants to resort to a forced sale at the last moment. Much like a game of musical-chairs, no one wants to remain standing when the music stops.

Indeed, we are already seeing many transactions and separation actions in the market. The Delek Group (concentrating on gas, oil and real estate) has attempted to sell its Phoenix Insurance Company several times, as did the IDB Group with its Clal Insurance Company. Alas, the potential buyers did not stand up to the regulator’s standards. Apax Partners sold Tnuva Dairies in a well-orchestrated deal in 2015, ahead of the curve. In another case, Bino Group, the controlling party of both The First International Bank of Israel and Paz Oil Company, was bound by the Concentration Law to choose between these two prime assets, and opted to decrease its holdings in the latter company.

In parallel, seeds of the third component of the Concentration Law are starting to bud. Under that component, overall-market concentration and sectoral competitiveness considerations must be taken into account when government rights or assets, such as telecommunication licenses or exploration concessions, are allocated. A pioneering example was the restriction of The Israel Corporation from entering the emerging field of oil-shale exploration.

The Concentration Law is unprecedented both in its widespread effect over the Israeli economy and in the aggressive remedies it applies to increase competition in the allegedly-concentrated market. The law does not include “grandfather clauses” exempting existing structures and holdings, resulting in Israeli investors being forced to sell or take other actions regarding prime assets within a limited time. All the while, these Israeli investors may also be prohibited from acquiring further Israeli assets, consequently shifting investments and debt out of Israel.

The good news is these restrictions on current players in the Israeli market create opportunities for new players. From the perspective of non-Israeli investors, the Concentration Law constitutes a regulatory springboard, giving them an advantage over existing concentrated players. Opportunity is certainly ripe for newcomers to the Israeli market.

The above does not constitute legal opinion or an investment recommendation.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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