A consortium of Abu Dhabi funds led by ADQ have called off a planned deal to buy a controlling stake in Israeli financial services firm Phoenix Holdings Limited.

The term sheet was terminated due to potential regulatory limitations on the deal that would have likely restricted several members in the consortium from making additional material investments in Israel, the controlling shareholders said in a letter to Phoenix, filed to the Tel Aviv Stock Exchange. Phoenix shares fell as much as 2.44% to 37.61 shekels.

“The parties are finalizing an agreement pursuant to which the controlling shareholder will sell the Consortium shares in the Company while still retaining at least 30% of the fully diluted shareholding of the business and thus the control stake,” the statement said.

A new share sale would be at the same price as agreed upon in the original agreement, it added.

The controlling shareholders, private investment firms Centerbridge Partners and Gallatin Point Capital, hold about 33% of Phoenix, according to a December statement.

Centerbridge and Gallatin said in December that the Abu Dhabi funds were expected to buy a 25%-30% stake in Phoenix. Phoenix is listed on the Tel Aviv Stock Exchange with a market value of about $2.6 billion and the deal was valued then at $855 million.

Israel and the UAE have sought ways to improve defense and economic relations since agreeing to forge diplomatic ties in 2020, in what was an historic breakthrough in the Middle East. The countries said the political accord would lead to billions of dollars of investment in Israel.