As of web-posting, Israel Discount Bank (TASE: DSCT) is conducting pricing for its NIS 17.4 billion in provident funds assets and NIS 14.6 billion in mutual fund assets. The provident funds will reported be sold for NIS 600 million.
The NIS 507 million company value at which Discount Bank acquired IDB Holding Corp. Ltd.’s (TASE:IDBH) stake in mutual funds management company Ilanot Discount Ltd. a month ago is expected to rise to NIS 600 million in the present sale.
The deadline for bids for Discount Bank’s mutual and provident funds was noon. Two bids each for the mutual and provident funds will go to the second round, and an auction will be held between them.
Discount Bank’s sale took Israel’s other medium-sized banks by surprise. United Mizrahi Bank (TASE:MZRH) executive expressed concern that Discount bank would complete the sale of its mutual and provident funds before Mizrahi Bank, enabling Discount Bank to enter the pension sector more quickly. Mizrahi Bank therefore today notified insurance companies and other interested parties that it was seeking preliminary offers for its mutual and provident funds by Thursday.
A problem with the purchase of Discount Bank’s provident funds is their very high proportion of self-employed members (84%). Under amendment 3 to the tax code, from January 2006, self-employed persons under the age of 45 will not be able to make deposits into provident funds, until after they make a deposit into a pension fund up to the national average wage. As a result, the inflow of funds into Discount Bank’s provident funds from deposits will fall by up to 50% over the coming years.
The main bidders in Discount Bank’s tender are reportedly Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), Direct Insurance - Financial Investments Ltd. (TASE:DIFI), Harel Insurance Investments Ltd. (TASE:HARL), Menorah Holdings Ltd. (TASE:MORA1;MORA5), and Migdal Insurance and Financial Holdings Ltd. (TASE:MGDL). E. Solomon Investment & Consultancy (1992) Ltd. (TASE:SOLO), controlled by Amit Berger and Markstone Capital Partners Group LLC, is expected to bid only for Discount Bank’s provident funds. Israel Phoenix Assurance Ltd. (TASE:PHOE1;PHOE5) and Excellence Investments Ltd. (TASE: EXCE) did not participate in the tender.
Published by Globes [online], Israel business news - www.globes.co.il - on November 8, 2005