Far Eastern intrigue surrounds Fosun’s acquisition of Israeli insurance firm

Despite the cloud of mystery over the fate of its chairman over the past few weeks — and the apparent difficulties in getting the deal done, at least according to media reports — Chinese conglomerate Fosun intends to go through with its purchase of Israel’s Phoenix Holdings Ltd.

Fosun has recommended to shareholders that they approve the acquisition, according to a report in the South China Morning Post. The acquisition “will further optimize the group’s capital structure and lower its cost of funding on a consolidated level,” the report quoted the company as saying.

Despite the innocuous-sounding statement, the proposed deal has generated much controversy in Israel — and in recent weeks, intrigue — with the unexplained disappearance of Fosun chairman Guo Guangchang in early December 2015 (he later resurfaced alive and well in New York).

Guo was incommunicado for about five days, according to media reports, setting off a wave of rumors — with hearsay running the gamut that he was detained by Chinese and/or international authorities to suspicions that he had been abducted by a criminal gang or even space aliens.

Fueling the conspiracy theories — as opposed to supposition that the busy businessman, said to be worth some $7 billion, was just taking some personal time — was the alleged “disappearance” of half a dozen other Chinese billionaires around the same time (most of them have apparently been found). The Chinese government has, in recent months, embarked on a major anti-corruption campaign, and a number of the missing executives were allegedly being questioned by the government on their role in the recent crash of the Shanghai Stock Exchange, among other things.

Fosun, one of the largest conglomerates in China, has done several previous deals in Israel — most notably the purchase of the health-tech firm Alma Lasers in 2013, and Check-Cap Pharmaceuticals in 2014.

Fosun announced last June that it wanted to buy a controlling stake in Phoenix, which Israeli business tycoon Yitzhak Tshuva is seeking to sell off in order to comply with new Israeli laws requiring large financial-industrial complexes to sell off assets in order to encourage competition. Fosun plans to purchase 52.31% of Phoenix, for a total of NIS 1.8 billion ($471 million). A binding agreement, pending approval by Israeli insurance regulators, was signed in June 2015 between the companies.

But the deal was marred from the start. Upon receiving the news of the deal, Phoenix workers called a strike, declaring that they would “embitter the lives of the new owners.” At issue was the union’s contention that Tshuva had refused to discuss a distribution, to the workers, of a percentage of the money the company stands to earn. According to the Phoenix employees, this is called for in their work contracts.

According to reports in the Israeli media, Fosun suspected that it could have labor issues with Phoenix workers, and demanded a discount on the market price of shares in case it had to compensate workers, and/or resolve other issues.

The Phoenix deal also has to be approved by the Treasury’s Supervisor of Insurance, Dorit Selinger. That thumbs-up has not been granted yet, although recent reports in the Israeli media said that Selinger “is tending towards” granting the approval.

However, those reports came out before Guo’s disappearance and consequent resurfacing. At a conference call with investors in mid-December of 2015, Fosun president Wang Qunbin said that Guo had actually been assisting Chinese authorities with an investigation. Speaking to reporters afterwards, he said that the board of directors “trusts chairman Guo, who is a wise man. He will actively cooperate and fulfill his duties to assist the investigation.” The president added that the probe surrounded Guo’s “personal affairs,” as opposed to issues that would affect the company.

What that means is anyone’s guess, but it might just be enough to plant seeds of doubt in the minds of investors — and Israeli regulators. Speaking to Bloomberg, Wu Kan, a Shanghai-based fund manager with JK Life Insurance, said that “the market is worried that the whole incident about Fosun isn’t over yet and there may be some negative ramifications, going forward.”

But there are no seeds of doubt at Fosun, according to the report in the South China Morning Post. “After the completion of the deal, Phoenix Holdings will become a subsidiary of the company and remain principally engaging in insurance and asset management business in Israel,” the report quoted Fosun as saying. When that would happen, though, was not mentioned.