Israel looks to break up conglomerates

Israel's government took aim at big business groups on Monday with a plan that would lower the level of concentration of economic power by breaking up of some of the country's largest conglomerates.
A committee commissioned by Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz recommended regulations to increase market competition by forcing conglomerates to sell either their financial assets or other "real" assets within four years.
This could lead to major companies being put up for sale.
In its interim report, the panel also recommended granting more power to minority shareholders in complex companies that have many tiers of subsidiaries. The minority shareholders would have veto powers over major acquisitions or the issuing of debt and equity.
Israel has one of the highest concentrations of corporate power in the developed world and the Finance Ministry said the country's 10 largest business groups control 41% of the market value of public companies.
Steinitz, who has said that pending a public hearing he will support the recommendations "100 percent", called the panel's report "a very positive turning point in the development of Israel's economy".
The committee's final report will be brought to a cabinet vote in about three months and would then need parliamentary approval to change Israel's regulatory laws.
A number of holding companies whose assets include both financial firms — such as banks and insurance companies — and "real" companies — like refineries, supermarkets and mobile phone operators — do not want to be forced to choose between the two and have opposed the measures.
Some of Israel's biggest companies, such as IDB Holding , Delek Group and Israel Corp , will likely be affected by the new regulations.
The Finance Ministry said the proposed changes will make it difficult for Israeli conglomerates, which commonly have cascading ownerships and cross-holdings, to broaden their "pyramidal structures".
The panel also recommended strengthening the Anti-Trust Authority in order to tackle the problem of concentration and to increase competition.
"(The panel's recommendations) will bring solutions to problems which many small countries, small markets face," said Bank of Israel Governor Stanley Fischer. "I think they have succeeded and succeeded big time."