ISRAEL Legal Business April 2015

November 2010 Legal Business 3 ISRAEL

80 Legal Business April 2015 Illustration/Photograph ARTIST’S NAME ISRAEL

International opportunities are emerging for lawyers in Tel Aviv, as Israel becomes less reliant on its traditional trading partners of the US and Europe, and diversifies into Asia-Pacific and other growth economies CHRIS CROWE

himon Peres, the 91-year-old former Israeli This symbolises a wider cultural and economic shift. For president, may not be the most obvious social decades, Israel’s political elite has made much of the nation’s media fanatic. Yet in 2014 he opened an account on natural affinity with the US and the influential Jewish Weibo, China’s equivalent of Facebook, expressing community there. That umbilical cord to the world’s most his desire to interact directly with the Chinese powerful nation that has fertilised Israel’s tech and start-up Speople, including its younger generation. The nonagenarian community remains intact. But in recent years, as western quickly received over 50 million ‘likes’ on his Weibo page. pressure and sanctions have been exerted on Israel u

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MONOPOLY PLAY: ANTITRUST CONCERNS LEAVE NATURAL GAS SECTOR IN LIMBO Ever since the sizeable Tamar and Leviathan natural gas fields were discovered in 2009 and 2010, Israel has been coming to terms with its energy wealth. Israeli energy company Delek and US-based Noble Energy have become the most powerful players in the industry. Many would have expected Israel to still be celebrating its good fortune, but its antitrust authority has had persistent concerns about Delek and Noble’s perceived dominance. Tamar, which is understood to hold 10.8 trillion cubic feet of natural gas, started flowing in 2013. Leviathan holds 22 trillion cubic feet and is not yet in production. ‘Noble and Delek have been brave enough to spend considerable amounts of money on Tamar gas field © Albatross/Israel Sun/Rex exploration and they have hit the jackpot,’ comments Simon Jaffa of Barnea & Co. were remaining concerns that these measures ‘Until the matter has been finally settled, As the big players in the market, the would still not defeat the alleged monopoly. investment and projects in the upstream oil antitrust commissioner has concerns that they With all this regulatory uncertainty, and gas sector are in limbo,’ says Renelle hold a de facto monopoly to supply natural gas efforts to promote foreign investment Joffe, the head of the energy group at to the Israeli market. A previous attempt to into Israel’s natural gas industry are now Meitar Liquornik Geva Leshem Tal. As such, reach a satisfactory arrangement with Delek uncertain. In May 2014, Australia’s Woodside she is downbeat about the short-term and Noble was cancelled at the end of 2014, with Petroleum withdrew its $2.7bn bid to buy a outlook for the energy practice: ‘Following the antitrust authority director general David 25% stake in Leviathan. ‘All this uncertainty the recent antitrust decision, the practice Gilo stating that the natural gas monopoly of puts off foreign companies coming into Israel has been focused more on regulatory issues Delek and Noble should be broken up. and investing,’ Jaffa comments. and less on projects, which in my opinion is How this is to be achieved is still unclear. He has concerns about how fast the gas a great pity.’ Noble and Delek own 85% of the Leviathan industry is moving in Israel and that the longer However, Dan Hacohen, head of the field and control the Tamar site as well. There it takes to get Leviathan into production the energy practice at Agmon & Co Rosenberg had been proposals that the gas from Tamar more it will depreciate the field’s long-term Hacohen & Co, who has worked on all the reserved for Israeli consumers, as well as the value. He believes that neighbouring states major gas discoveries in Israel, is more smaller Tanin and Karish gas fields, be sold that commercialise their gas reserves first will upbeat: ‘Proceedings will probably bring to a third party. Yet with Leviathan being the have a natural advantage on the regional and about divestitures and assets will change most significant of the various fields, there international stage. hands bringing in international investment.’

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

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Makhteshim Agan Industries for $2.4bn process of bringing products to the market in 2011. Herzog Fox advised Makhteshim generally requires more long-term vision Agan, with fellow domestic firm GKH Law and is more capital intensive. In this regard, Offices advising ChemChina. Israel’s rationale for seeking alternative Large delegations of Chinese are routinely funding channels is based on shrewd witnessed in Israel looking at investment and thinking. Neusoft Group, China’s largest IT acquisition opportunities. Hong Kong tycoon and software company, acquired a majority Li Ka-shing donated $130m to Technion, shareholding in Aerotel Medical Systems Israel’s leading engineering university in in 2014. S. Horowitz & Co advised Neusoft, 2013, as part of a deal to establish a joint while Gelbard, Amit, Wesler – Law Office academic venture with Shantou University represented Aerotel. in China’s Guangdong Province. The venture The red-carpet treatment for China has will create the Technion Guangdong Institute not just been confined to the start-up and of Technolog y. emerging company sector. China Harbour’s Geva says that while China is eager Pan Mediterranean Engineering Company to acquire some of Israel’s innovation at (PMEC) won the tender to construct the attractive prices, the trend is mutually Southport Terminal at Ashdod. There has ‘There is less beneficial. Israel’s tech companies for the also been talk of the proposed high-speed most part have not struggled for funding as rail link between the Mediterranean and the competition for investors have been able to envisage healthy Red Sea – the ‘Med-Red’ – not even going to returns in the short-to-medium term. ‘Israeli tender and simply being handed to the u certain deals. venture capitalists tend to focus either Investors may not face on areas where Israel has dominance, as much competition such as military- related technologies, for business as in the or sectors that are less capital- US or UK.’ intensive such as new media, internet Michael Barnea, and telecoms,’ he comments. Barnea & Co He points to the $1.1bn sale of but also by the attractive valuations. ‘You get Israeli smartphone more bang for your buck,’ says Ben-Yehoshua. navigation Israeli companies have limited access to application Waze to capital compared to their US equivalents Google in 2013 as and so their valuations tend to be an example where significantly lower. ‘The companies are investors have made under-priced. The same company would a successful exit. cost three times more in Silicon Valley,’ Cleary Gottlieb Steen comments Yair Geva, the head of the China & Hamilton and desk at Herzog Fox. Israeli firm Goldfarb Barnea & Co founding partner Michael Seligman & Co Barnea also believes that investors benefit represented Google, from a slightly more convivial environment while Waze was when chasing deals: ‘In some respects advised by GKH Law because of the geopolitical limitations, Offices and Silicon there is less competition for certain deals. Valley-headquartered Investors may not face as much competition Gunderson Dettmer. for business as in the US or UK.’ In contrast, the Such valuations have not prevented biotech, healthcare some sizeable transactions getting through. and medical devices This includes China National Chemical segment has Corporation (ChemChina) acquiring Israel’s struggled because the

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ISRAEL: DEALS IN 2014

Announcement Target Target dominant Target legal advisers Bidder Bidder dominant Bidder legal advisers Seller Seller legal advisers Deal value date geography geography (US$m) 22/05/2014 Tnuva Food Industries Israel Meitar Liquornik Geva Leshem Tal Bright Food (Group) China Fischer, Behar, Chen, Well, Orion & Co; Apax Partners Global Law Office; Herzog 1,749 (56.1% stake) Freshfields Bruckhaus Deringer Fox & Neeman 14/02/2014 Viber Media Israel White & Case Rakuten Japan GKH Law Offices; Linklaters; Shabtai family; IRS WEST; Meister Seelig & Fein 900 Morrison & Foerster Marco family 01/10/2014 Jiangsu Anpon Electrochemical China ADAMA Agricultural Israel Davis Polk & Wardwell; Freshfields China National Chemical Simpson Thacher & Bartlett 623 Co; Jiangsu Huaihe Chemical Solutions Bruckhaus Deringer; Herzog Corporation Co; Jiangsu Maidao Fox & Neeman Agrochemical Co; Jingzhou Sanonda Holdings 07/07/2014 SPTS Technologies Group UK Osborne Clarke Orbotech Israel Cravath, Swaine & Moore; Dorsey Bridgepoint Travers Smith 370 & Whitney; Tulchinsky Stern Marciano Cohen Levitski & Co 10/07/2014 Veolia Environnement (water, Israel Oaktree Capital Group US De Pardieu Brocas Maffei; Herzog Veolia Environnement King & Wood Mallesons; 340 waste and energy business Fox & Neeman S. Horowitz & Co in Israel) 30/05/2014 Wilocity (undisclosed stake) Israel Sharir, Shiv & Co; Wilson Sonsini Qualcomm Incorporated US Cooley; Fischer, Behar, Chen, Well, Benchmark Capital; 300 Goodrich & Rosati Orion & Co Sequoia Capital; Jerusalem Global Ventures; Tallwood Venture Capital; Vintage Ventures Management 16/12/2014 Yunnan Yuntianhua Co China Fangda Partners Israel Chemicals Israel Simpson Thacher & Bartlett 268 (15% stake) 11/12/2014 SCR Engineers Israel Zellermayer Pelossof Rosovsky Tsafrir Allflex Group New Zealand Latham & Watkins Tene Capital 250 Toledano & Co 06/05/2014 Coral-Tell Internet Services Israel Meitar Liquornik Geva Leshem Tal Axel Springer Digital Germany Goldfarb Seligman & Co; Walla! Communications 230 Classifieds Hengeler Mueller 13/11/2014 Aorato Israel H-F & Co Microsoft Corporation US Herzog Fox & Neeman Accel Partners; Innovation 200 Endeavors; Glilot Capital Partners Source: Mergermarket

u Chinese government. ‘It is emblematic of Beyond China, there has been curiosity Horowitz & Co, one of the largest firms the increasingly close relationship between from other Asian states in Israel’s dynamic in Israel, says that he worked on four the two countries,’ Jaffa says. economy. Clifford Davis, a partner at S. transactions in a month involving Japanese companies. In 2014, e-commerce giant Rakuten acquired Israel messaging app ‘There are more and company Viber Media for $900m. Viber was advised by White & Case, with GKH Law more opportunities Offices,Linklaters, and Morrison & Foerster representing Rakuten. and actual deals While having a tight nexus with the world’s leading economic superpowers, such between Israel as the US, China, Japan and the European Union, Israel is also making a play for the and China.’ developing world. Steven Berelowitz, a partner at Tel Aviv Yoav Sade, firm Hamburger Evron & Co, says that over the past decade exports from Israel to Africa Meitar Liquornik have increased from approximately $370m to some $1.3bn. He believes that a slight Geva Leshem Tal decline in trade in the last couple of years

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As China moves from an ISRAEL: DEALS IN 2014 economy based on cheap labour and manufacturing for export, Announcement Target Target dominant Target legal advisers Bidder Bidder dominant Bidder legal advisers Seller Seller legal advisers Deal value to a market based more date geography geography (US$m) on innovation, internal 22/05/2014 Tnuva Food Industries Israel Meitar Liquornik Geva Leshem Tal Bright Food (Group) China Fischer, Behar, Chen, Well, Orion & Co; Apax Partners Global Law Office; Herzog 1,749 consumption and services, (56.1% stake) Freshfields Bruckhaus Deringer Fox & Neeman Sade sees a great 14/02/2014 Viber Media Israel White & Case Rakuten Japan GKH Law Offices; Linklaters; Shabtai family; IRS WEST; Meister Seelig & Fein 900 opportunity. Morrison & Foerster Marco family 01/10/2014 Jiangsu Anpon Electrochemical China ADAMA Agricultural Israel Davis Polk & Wardwell; Freshfields China National Chemical Simpson Thacher & Bartlett 623 Co; Jiangsu Huaihe Chemical Solutions Bruckhaus Deringer; Herzog Corporation Co; Jiangsu Maidao Fox & Neeman ‘The Chinese market is interested Agrochemical Co; in technologies and innovations that Jingzhou Sanonda Holdings can add value in sectors like healthcare, 07/07/2014 SPTS Technologies Group UK Osborne Clarke Orbotech Israel Cravath, Swaine & Moore; Dorsey Bridgepoint Travers Smith 370 cleantech, internet, telecoms and media,’ & Whitney; Tulchinsky Stern Marciano he says. Cohen Levitski & Co Geva, who runs Herzog Fox’s China desk, 10/07/2014 Veolia Environnement (water, Israel Oaktree Capital Group US De Pardieu Brocas Maffei; Herzog Veolia Environnement King & Wood Mallesons; 340 holds similar sentiments to Sade: ‘The cake waste and energy business Fox & Neeman S. Horowitz & Co is going to get bigger in the next few years. in Israel) 2015 will be by far the best year ever in 30/05/2014 Wilocity (undisclosed stake) Israel Sharir, Shiv & Co; Wilson Sonsini Qualcomm Incorporated US Cooley; Fischer, Behar, Chen, Well, Benchmark Capital; 300 terms of deal size and volume size.’ Goodrich & Rosati Orion & Co Sequoia Capital; Jerusalem Tehila Levi-Lati leads the China desk at Global Ventures; Tallwood ZAG – S&W – an international firm jointly Venture Capital; Vintage owned by Israel’s Zysman, Aharoni, Gayer Ventures Management & Co and US practice Sullivan & Worcester 16/12/2014 Yunnan Yuntianhua Co China Fangda Partners Israel Chemicals Israel Simpson Thacher & Bartlett 268 – which has a co-operation agreement (15% stake) with Chinese firm JunZeJun Law Offices. 11/12/2014 SCR Engineers Israel Zellermayer Pelossof Rosovsky Tsafrir Allflex Group New Zealand Latham & Watkins Tene Capital 250 Levi-Lati, who has been working on China Toledano & Co matters for over ten years, will relocate 06/05/2014 Coral-Tell Internet Services Israel Meitar Liquornik Geva Leshem Tal Axel Springer Digital Germany Goldfarb Seligman & Co; Walla! Communications 230 to JunZeJun’s Chengdu office in 2015 and Classifieds Hengeler Mueller continue to run ZAG’s China desk from 13/11/2014 Aorato Israel H-F & Co Microsoft Corporation US Herzog Fox & Neeman Accel Partners; Innovation 200 there. She believes there is no better time Endeavors; Glilot to capture the expanding demand for Capital Partners transactions involving China and Israel. ‘If Source: Mergermarket you ask me, China will be bigger than the US in ten years’ time,’ she says. It would appear that the fact-finding was a mere blip and that Israeli innovation cross-border work involving Asia and other missions and admiration between the two is well positioned to play an integral emerging markets. While the legal market countries will continue to blossom, because role in Africa’s emergence as a genuine has a strong contingent of US-trained of the clear mutual benefits. Daniel Green economic power. ‘Over the past three years attorneys that have emigrated to Israel, the and Simon Weintraub are partners at Yigal approximately 20% of the sub-Saharan links to other markets are less obvious. Arnon and are members of the firm’s Asia countries have shown a steady growth of Israel-based lawyers frequently travel to desk. Earlier this year, the two travelled to around 7% and are becoming ever more Silicon Valley and New York, and have done Beijing and Shanghai and came back filled interesting to Israeli companies,’ he says, for years, but now they are making the with optimism. Weintraub says that it was suggesting that planned infrastructure and journey to places such as Shanghai, Beijing his first visit to mainland China and he transport improvements between Israel and and Tokyo. was struck by the vast amount of available Africa can only help this phenomenon. Yoav Sade heads Meitar Liquornik capital there, the advanced nature of the Geva Leshem Tal’s China desk and has country and the sophistication of the local SEIZING INITIATIVE seen a significant uptick in cross-border law firms. Indeed, since their visit, Green Given the new markets that Israel is transactions involving China in the last and Weintraub have already welcomed two now trading with, it represents a notable five years. ‘There are more and more visiting Chinese law firms. challenge to Israel’s modestly sized law opportunities and actual deals between Green remarks: ‘China has a lot of firms – until recently, a firm of over 200 fee- Israel and China. You regularly have capital for outbound transactions and they earners was considered exceptionally large. Chinese companies making acquisitions, are looking for places to park that money. Despite size limitations, Israeli firms investments and taking minority stakes in When you put it altogether, you can see an have been quick to position themselves for Israeli companies,’ he comments. emerging win-win partnership.’ LB

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