UAE offer for Israeli insurer paves way for more deals, minister says

Foreign Trade Minister Thani Al Zeyoudi tells The Circuit that economic activity with Israel will probably reach $10 billion well ahead of schedule

Asian Business Leaders Forum

UAE Minister of State for Foreign Trade Thani Al Zeyoudi

TEL AVIV, Israel – While regulators scrutinize a bid from the United Arab Emirates for Israel’s largest insurance company, the Gulf state will be looking to broaden its interests in the Israeli financial services industry, Minister of State for Foreign Trade Thani Al Zeyoudi told The Circuit.

Al Zeyoudi said the offer last week from a consortium led by Abu Dhabi-based ADQ for a controlling stake in Israel’s Phoenix Group was “just another signal that relations are going to grow.” Israeli insurers, financial services companies and fintech startups are among the most attractive candidates for partnerships and acquisitions, he said.

In a video interview from his office in Abu Dhabi, the UAE’s capital, Al Zeyoudi also said he expects ties between the two countries to strengthen under returning Israeli Prime Minister Benjamin Netanyahu. He said the free-trade agreement that the UAE and Israel ratified on Dec. 11 would likely reach its goal of generating an annual $10 billion in bilateral economic activity by 2026, two years ahead of the ministry’s earlier projections. Two years after the UAE, Bahrain, Morocco and Sudan signed agreements to normalize relations with Israel, he said more Arab countries are getting ready to engage with the Jewish state.

“There is a growing appetite across the region for collaboration and cooperation,” Al Zeyoudi said. “There are now six countries in the Arab world that have recognized Israel and the benefits of these ties will accumulate as trade flows increase. Obviously, we cannot decide for other countries because it’s [a matter of] sovereign rights. But I’m sure through these engagements and the results from our economic and bilateral trade, it’s a signal to everyone how important and how powerful this cooperation is.”

In his own efforts to understand the Israeli financial services market, Al Zeyoudi said he developed a warm relationship with Samer Haj-Yehia, chairman of Bank Leumi, Israel’s largest lender. Haj-Yehia, an Arab citizen of Israel, was a surprise speaker in October at the mammoth Future Investment Initiative conference in Saudi Arabia, even though the two countries do not have diplomatic relations. Al Zeyoudi first met the banker during a meeting with Israeli business leaders in Dubai on Sept. 15, 2020, the day the Abraham Accords were signed in Washington. “Since then, the relationship is very close with him,” Al Zeyoudi said. Haj-Yehia, who also spoke at conferences in the UAE last month, acknowledged through a Leumi spokesman that he has met with the Emirati minister and declined to comment further.

Al Zeyoudi, 40, who was previously minister of climate change and the environment, studied at the University of Tulsa in Oklahoma for a bachelor’s degree in petroleum engineering. He earned an MBA at the New York Institute of Technology and later went to the SKEMA Business School in Lille, France, for a PhD in strategy, program and project management.

In the insurance deal, Al Zeyoudi said ADQ, a holding company owned by the Abu Dhabi emirate, is prepared to confront concerns expressed in Israel about foreign control of Phoenix, the largest manager of employee pension funds. The investment group it leads signed a term sheet last week with Phoenix’s controlling shareholders, U.S. investment firms Centerbridge Partners and Gallatin Point Capital, to buy between 25-30% of the company’s shares for as much as $800 million.

“It’s all been studied very well and thoroughly from both sides,” he said. “No deals will be signed without the full picture [being] put on the table, being discussed, being tackled, and then we move on to the next level.”

The Marker, an Israeli financial newspaper, called the proposed sale “an irresponsible and unprecedented act of folly” because it gives the UAE too much power over the pension savings of Israeli citizens. A 2017 bid by China’s Fujian Yango Group to buy control of Phoenix was withdrawn after it was rejected by Israel’s Capital Market, Insurance and Savings Authority.

If ADQ’s offer is accepted by the regulator, the deal would be one of the biggest between the UAE and Israel since the Abu Dhabi sovereign wealth fund Mubadala bought a 22% stake in an offshore Israeli natural gas field last year for $1 billion.

“It probably won’t be approved easily and it won’t be a quick decision,” said Nimrod Goren, president of Mitvim, the Israeli Institute for Regional Foreign Policies, and a senior fellow at the Middle East Institute in Washington. “There will be attempts to put all sorts of safeguards around it,” he told The Circuit.

Regarding Netanyahu’s comeback, Al Zeyoudi said the UAE has grown used to Israel’s frequent government transitions and doesn’t expect political changes to interrupt growth in trade between the two countries. Some Israeli investors have expressed concern that cabinet members in Netanyahu’s proposed government who want to annex the West Bank will reignite conflict with the Palestinians.

”Believe me, this will not affect the economy because everyone wants the numbers to grow,” Al Zeyoudi said. Netanyahu “was part of the initiation of the Abraham Accords and I’m sure he will make sure of its success.”

In the interview, Al Zeyoudi touched on how the collapse of FTX has affected the UAE’s efforts to promote itself as a world center for cryptocurrency trading and research.

“Obviously there’s concern when a high-profile business appears to have violated its customers’ trust in this way,” he said. “It offers a clear signal about the need for regulations, consumer protections, proper law and international conventions in the sphere.”

Given his experience as environment minister and a previous post as the UAE’s representative to the International Renewable Energy Agency (IRENA), which is based in Abu Dhabi, Al Zeyoudi said he’s looking forward to next year, when his country plays host to the U.N.’s annual climate change conference, COP28.

Beyond his desire to showcase cooperation between government and private industry in converting to sustainable energy sources, Al Zeyoudi said the UAE will also highlight the deal it brokered in which Jordan will provide solar energy to Israel in exchange for water from an Israeli desalination plant on the Mediterranean. The three sides signed a memorandum of understanding last month at the COP27 conference in Sharm el-Sheikh, Egypt.

“We’re looking forward to bringing the world here,” he said. “Sustainability is embedded with us as a nation. We have diversified our economy and diversified our energy mix. This is the story that we want to bring to the table, to discuss the real impact and the practical actions that we have taken on the ground.”

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