The Tel Aviv Stock Exchange is up for sale, and reportedly more than 10 foreign stock exchanges have shown an interest in acquiring a stake in Israel’s only securities exchange.
The sale is part of a push to draw additional investors to the exchange and make it more competitive and efficient. TASE believes a new strategic partner, in the shape of a major global stock exchange, will make it a more dominant player globally and make it more accessible to the public.
Hebrew media said the exchanges that are interested in acquiring a stake include London, Hong Kong, Toronto, Australia, Singapore, and Warsaw.
A TASE spokeswoman declined to comment.
The exchange has been suffering from an outflow of companies — some 200 companies have delisted from the exchange over the last decade, many citing the burdensome regulatory environment — and a slump in trading volumes.
“The move is in line with a global trend in which stock exchanges are becoming less local and more global, joining a network of other bourses,” said Julien Assous, the CEO of Israel’s IBI Brokerage who is also a TASE director and the head of the Israel Brokerage Association.
“Joining forces with another bourse is expected to bring added knowhow, potentially more investors and uniformity in trading methods,” he said. “It is difficult to justify having such a local market when the world is going in another direction. It will bring us more knowhow and technology and will not detract from Israel’s economic independence.”
Stock markets globally have undergone a wave of mergers in the past decade, with most of the activity taking place in cross-border deals, with local stock markets joining newly formed international network conglomerates. These kind of deals give international exchanges a foothold in other countries, and are based on the belief that, for stock exchanges, “bigger is better.”
A deal to merge the London Stock Exchange with Germany’s Deutsche Borse was stalled last year. Nasdaq got an greater foothold on the European continent after it bought the Nordic stock market OMX in 2007 for $3.7 billion. This opened it up to equity and derivative businesses in countries like Sweden, Denmark, Iceland, Finland and the Baltics, according to Credit Suisse, as cited by Business Insider.
The sale of a TASE stake has been made possible after the exchange demutualized, becoming a for-profit organization, last September, and changed its ownership structure. Becoming a for-profit organization entitles the TASE to distribute profits and issue shares to the public, which it plans to do on its own exchange in 2019. It also enabled the exchange to offer to buy out its existing shareholders.
Under the new ownership structure, ownership and control of the TASE have been separated from membership of the exchange — which was not the case before the reform was approved. The ownership shares of TASE’s existing members, both banking and non-banking institutions, are being reduced, and no single member will be able to hold more than a 5% ownership in the exchange. The current owners, which include Israel’s largest banks and brokerages, have given TASE CEO, Ittai Ben-Zeev, the option to sell up to 71.7 percent of their shares to a large foreign exchange, who will also be a strategic partner.
Ben-Zeev now has until April 18 to strike a deal with a foreign exchange for the sale of the shares at a TASE valuation of NIS 500 million ($144 million), a person familiar with the matter said.
Twenty new companies listed on the exchange in 2017, and the market had a $390 million daily turnover on the equity market, a 18% increase compared to 2016. There are 457 companies that have their shares listed on the exchange, up from 451 in 2016, but still well below the 623 listed companies in 2008. The total market capitalization of shares on the exchange was $231 billion, according to data provided by the exchange.