Israel cabinet OKs break-up of big conglomerates

JERUSALEM, April 22 Sun Apr 22, 2012 10:39am EDT

JERUSALEM, April 22 (Reuters) - Israel's cabinet on Sunday approved a plan to break up some of the country's largest conglomerates, aiming to increase competition and bring down prices after protests over the cost of living last year.

Israel has one of the highest concentrations of corporate power in the developed world with the government estimating that the country's 10 largest business groups control 41 percent of the market value of public companies.

"The government's decision today is another step in lowering the cost of living," Prime Minister Benjamin Netanyahu said in a statement. He told the cabinet that getting rid of cartels and monopolies would increase competition.

Conglomerates will have to choose between owning major financial or non-financial companies. Holding companies structured like pyramids will have to limit how many tiers of subsidiaries they have.

Existing groups, which currently hold listed subsidiaries that in turn have their own subsidiaries, will be allowed no more than three tiers of subsidiaries. New conglomerates can have two.

Companies will have four years to comply.

Protesters say Israel's conglomerates are partly to blame for driving up prices of basic goods. Protests are expected to resume in coming weeks.

According to the recommendations, companies cannot hold a financial firm with assets above 40 billion shekels ($11 billion) at the same time as a non-financial company of more than 6 billion shekels of revenue.

As a result, the IDB Group would have to divest Clal Insurance or other key holdings such as Cellcom , Israel's largest mobile phone operator.

Delek Group would have to decide between keeping insurance company Phoenix and brokerage Excellence Nessuah or its fuel business -- which includes a number of offshore natural gas fields.

Private equity firm Apax Partners would need to choose between food maker Tnuva or the Psagot brokerage.

($1 = 3.75 shekels) (Reporting by Steven Scheer; Editing by Matthew Tostevin)