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Billionaire Saban’s Deal Flop Exposes Israel to U.S.-China Spat

Ivan Levingston
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Billionaire Saban’s Deal Flop Exposes Israel to U.S.-China Spat

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Billionaire Haim Saban’s failed investment in an ailing Israeli telecommunications company could become a headache for Hong Kong’s CK Hutchison Holdings Ltd., which risks getting caught in the crossfire of a U.S. campaign to cool Israel’s ardor for Chinese investment.

Saban, a media mogul with stakes in entertainment companies around the world, was the controlling shareholder in Israel’s second-largest mobile operator, Partner Communications Co. On Tuesday, he gave up ownership after saying he can’t repay the loan underwriting his 30% stake in Partner, which would put the shares back in the hands of the lender -- Hutchison.

That’s where the geopolitical catfights come in.

For Hutchison to take back its stake in Partner, it needs approval from Israeli authorities under fierce pressure from the Trump administration -- the country’s most powerful and generous ally -- to cut down Beijing’s global footprint. That means a green light isn’t a given, even though Hutchison is based in the semi-autonomous city of Hong Kong and has a long history with Partner, having co-founded it in 1998.

“This is a trade war turned into a technology war,” with Israel in the middle, said Roi Feder, who runs the Tel Aviv office for consulting firm APCO Worldwide. “The balancing act here is to keep the door open to China’s investment.”

The case may even become the first test of a new regulatory panel Israel is setting up at Washington’s behest to vet foreign investment for potential national security concerns. Telecommunications have become a point of particular concern in President Donald Trump’s global trade fight against Beijing, and the U.S. is pressing to keep Beijing out of Israel’s telecoms market.

Representatives for Saban and Partner declined to comment. The Ministry of Communications said the issue was being examined. Officials at Hutchison didn’t respond to a request for comment.

Fine Line

Israel is walking a fine line between allaying U.S. concerns and placing as few restrictions as possible on crucial foreign investment. China has become a significant tech and infrastructure investor, and last year was Israel’s second-largest trading partner after the U.S., with $11.5 billion in annual transactions, according to data compiled by Bloomberg.

Saban took on a $300 million loan owed to Hutchison when he became the mobile phone operator’s controlling shareholder in 2013. The Hong Kong company’s first hurdle will be to win permission from Israel’s Ministry of Communications to take back control. Then, if regulators so decide, it may find itself in front of the foreign investment board, whose formation was announced in October.

“When it comes to politics, the problem is you just don’t know,” said Gil Dattner, analyst at Bank Leumi Le-Israel Ltd. “It wouldn’t be completely surprising if they are refused, but I think given their history with the company, they have a better chance of being approved.”

To contact the reporter on this story: Ivan Levingston in Tel Aviv at ilevingston@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Amy Teibel, Mark Williams

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