Bloomberg News

Netanyahu Vow Rattles Markets as Cellcom Sinks: Israel Overnight

September 20, 2011

Sept. 20 (Bloomberg) -- Cellcom Israel Ltd., the mobile phone company controlled by billionaire Nochi Dankner, fell the most in a month in New York, joining a rout in the nation’s biggest holding companies as Prime Minister Benjamin Netanyahu proposed breaking up conglomerates to spur competition.

The rule changes target Israel’s 10 largest corporate groups, which comprise 41 percent of the value of publicly traded companies, according to data included in a Finance Ministry presentation yesterday. Cellcom, which is 47 percent owned by Dankner’s Discount Investment Corp., sank 4.3 percent to $20.81 on the New York Stock Exchange. Delek Group Ltd. and Paz Oil Co. sank more than 6 percent in Tel Aviv yesterday.

“These groups now face a problem, they need to decide what they want to sell,” said Gilad Alper, an analyst at Excellence Nessuah Investment House in Ramat Gan, Israel. “There’s concern that some of the groups will have to use shotgun sales in order to comply with the new regulation.”

Netanyahu pledged to act on recommendations from a government-appointed panel that he said yesterday “will lead to significant changes in the Israeli economy.” About 20 families control 25 percent of the listed companies on the Tel Aviv Stock Exchange, representing one of the highest concentrations among developed economies, the central bank said in its 2009 annual report.

Tshuva, Bino

Shares of Netanya, Israel-based Cellcom posted the second- biggest drop on the Bloomberg Israel-US 25 Index of the largest Israeli companies traded in New York. The gauge dropped for the first time in a week, retreating 1.6 percent to 82.43. Israel’s TA-25 benchmark index fell for the first time in five days yesterday after a government-appointed panel recommended steps to boost competition, including eliminating major cross holdings in financial companies.

Delek Group Ltd., the Israeli holding company owned by Isaac Tshuva that has stakes in natural-gas businesses as well the insurer Phoenix Holdings Ltd., tumbled 6.8 percent to 495.40 shekels yesterday, the lowest level since July 2009. The shares gained 5.8 percent today.

Paz Oil Co., a petroleum products maker controlled by Zadik Bino, who also owns First International Bank of Israel Ltd., tumbled 6.5 percent yesterday. The shares rose 3.2 percent today. Cellcom shares climbed 1.8 percent to 77.69 shekels in Tel Aviv today, the equivalent of $21.04. They fell 1.4 percent yesterday.

The changes may result in Delek selling Phoenix, Bino disposing of First International and Dankner divesting Clal Insurance Enterprise Holdings Ltd., according to Terence Klingman, head of research at Meitav Brokerage.

Not Enough Appetite

“There will be big chunks of shares that will have to be distributed and there may not be enough institutional appetite to buy these shares,” Klingman said by telephone yesterday.

The TA-25 Index climbed 2.5 percent to 1,059.41 today after yesterday’s 2.8 percent slump.

Netanyahu said yesterday the panel’s recommendations will help fix “the situation that has gone on for decades.”

The panel made its conclusions public as the government deals with consumer protests over the cost of living. Netanyahu pledged Sept. 4 to curb inflation after rallies brought more than 400,000 people onto the streets.

Netanyahu said he will act on recommendations from a panel headed by Tel Aviv University economist Manuel Trajtenberg that are due by the end of this month and aim to provide cheaper housing and bring down prices for food, child care and transportation.

Investors are concerned about “a change in the rules of the game,” Ruben Eblagon, chairman of Tel Aviv-based Rosario Capital Investment House, said yesterday in an e-mailed statement. “This could lead to a slowdown in the economy and hit the middle classes -- exactly the opposite of what the committee is looking to do.”

Mellanox Climbs

The shekel weakened for the for a second day, dropping 0.1 percent to 3.6918 per dollar.

Mellanox Technologies Ltd., the 12-year-old Israeli adapter maker part-owned by Oracle Corp., rose 1.3 percent to a record $35.60, the highest since the company listed shares in February 2007. The Tel Aviv shares retreated for a third day today, declining 1.9 percent to 123.70 shekels, or the equivalent of $33.50. The company said after the U.S. close it’s planning a public offering of 3 million shares.

EZchip Semiconductor Ltd., the Israeli maker of network processors that counts Cisco Systems Inc. as a customer, dropped 1.1 percent to $34.47 yesterday. The Tel Aviv shares climbed 2.1 percent today to 128.80 shekels, or the equivalent of $34.88.

The stock was cut to “hold” from “buy” at Auriga Securities.

Alon Jumps

Alon Holdings Blue Square Israel Ltd., the nation’s second- largest food retailer, advanced 7.2 percent to $5.65. The Tel Aviv shares jumped 8.3 percent to 21.07 shekels, or the equivalent of $5.71, today.

Nice Systems Ltd., a maker of digital surveillance and monitoring systems, fell 1.4 percent to $30.45. The Tel Aviv shares advanced 3.6 percent to 115.50 shekels, or the equivalent of $31.28, today.

Nice agreed to acquire Fizzback, a maker of customer- service software, for about $80 million in cash. The acquisition is expected to be completed in the fourth quarter and add to adjusted earnings within four quarters after the closing, it said.

--With assistance from Alisa Odenheimer and Gwen Ackerman in Jerusalem. Editors: Brendan Walsh, Marie-France Han

To contact the reporters on this story: Susan Lerner in Jerusalem at slerner2@bloomberg.net; Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net; Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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