ISRAEL
84
Legal Business
April 2015
over its conflict
with Palestine, it has
turned its sights to the East,
where Asian jurisdictions have
taken a less judgemental line on
its political and military stance.
Simon Jaffa, a partner at
Barnea & Co, says that trade and
investment coming from Asia is
making a fundamental difference
to economic stability in Israel, and
is a welcome boost to the local
legal profession: ‘The Chinese are
interested in doing business and they
are not going to be prevented from
doing business simply because of the
political environment.’
And the Israelis and the Chinese have
an enduring mutual appreciation. Amit
Ben-Yehoshua, an Israeli consultant at the
Shanghai office of Dacheng Law Offices
(the Chinese firm that recently announced
a merger with Dentons), says he is still
routinely surprised by the Chinese people’s
respect for his country. ‘If you take a taxi cab
in China and say you are from Israel, they
will think that you are very smart,’ he argues.
Daniel Green, a partner at Yigal Arnon &
Co, says there is no history of anti-Semitism
in China: ‘They see a little scrappy country
of immigrants and refugees, which against
all odds has transformed itself into a
technology superpower.’
CAPITAL FLOWS
History and traditions aside, market data
illustrates the growing importance of
Israel’s trading relationship with China
and Asia. According to Mergermarket, four
of the top ten Israeli M&A transactions in
2014 involved a Chinese or Asian party
(see ‘Israel: deals in 2014’, page 86). The
largest was Shanghai-headquartered
Bright Food’s $1.75bn acquisition of Tnuva
Food Industries, Israel’s largest food
manufacturer and distributor, from Apax
Partners. Freshfields Bruckhaus Deringer
and Israel practice Fischer, Behar, Chen,
Well, Orion & Co advised Bright Food,
while China’s Global Law Office and Israel
firm Herzog Fox & Neeman advised Apax
Partners. Tel Aviv-based Meitar Liquornik
Geva Leshem Tal represented Tnuva.
Koby Simana, chief executive at IVC-
Online – a resource centre for data and
information on Israeli hi-tech and venture
capital investments – says that local hi-
tech companies and venture capital funds
have traditionally sought their funds from
American institutional investors, family
offices and corporates. But he says there has
been a notable shift in capital coming from
China, Japan and Korea.
While the deals involving Chinese and
Asian investors have been comparatively
large by Israel’s standards, buyers are lured
to Israel by not only the pioneering spirit,
u
While Israel is increasingly turning its sights
to Asia-Pacific and other emerging markets,
the US, its closest long-term trading partner,
has identified Israel’s capital markets as an
attractive location to raise money.
Much of the interest is coming from
New York-based Jews who happen to run
some of the biggest real estate investment
companies in the
country. Gary
Barnett, the
president and
founder of Extell
Development
Company, raised
some $300m on
the Israeli bond
markets in 2014.
Dudi Berland,
a partner at
corporate finance
firm Shimonov &
Co, says he has
been working for
50-hours straight at times as more US real
estate investors look to tap into the Israeli
debt markets.
This phenomenon derives from US
real estate investors traditionally avoiding
the US corporate bond market. As many
of these companies are seen as small-
to-medium sized in the US context, they
often attract lower ratings than larger
US bluechips, unlike in Israel where they
are regarded as much more sizeable
organisations. ‘Small-to-medium sized
companies in the US are considered to be
giants here,’ Berland remarks.
In addition, Israel currently has lower
interest rates than in the US, making it
attractive for issuers. With interest rates
at a historic low, investors are desperate to
put money into something that is going to
generate a sufficient return. Clifford Davis
of S. Horowitz & Co says: ‘Israel has this
confluence of money, demand and supply. It
really is a win-win situation at the moment.’
Israel’s pension and mutual funds
are obligated to invest on behalf of their
stakeholders and
currently the
bond markets
are an attractive
option. With
these real estate
developers given
high credit ratings
by the Israeli
authorities, it
makes them all the
more compelling.
‘Mutual funds are
only allowed to
invest in Israeli
securities. There
is lots of public money to invest,’ remarks
Shirel Guttman-Amira, head of the corporate
department at Agmon & Co Rosenberg
Hacohen & Co.
The US real estate issuers have also
filled a gap left by a limited domestic bond
market. This is largely linked to a series
of Israel’s tycoons running into financial
distress recently.
Berland believes market fundamentals
mean that the Israeli securities market
will not necessarily remain a niche route
explored only by US real estate investors
that have personal or business links to the
nation. He says that other industries and
other jurisdictions, such as the UK, are likely
to tap the local debt markets.
FAVOURABLE CONDITIONS: US REAL ESTATE
INVESTORS ACCESS ISRAELI BOND MARKET
‘Israel has this
confluence of money,
demand and supply.
It really is a win-win
situation at the moment.’
Clifford Davis,
S. Horowitz & Co
