Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) this morning bought Israel Discount Bank’s (TASE: DSCT) mutual and provident funds, which manage an aggregate NIS 32 billion in assets, for NIS 1.31 billion.
By winning the Discount Bank tender, Clal Insurance will manage NIS 80 billion in assets, more than Migdal Insurance and Financial Holdings Ltd. (TASE:MGDL) and Israel Phoenix Assurance Ltd. (TASE:PHOE1;PHOE5) combined, and will consolidate its status as Israel’s largest insurance company in finance.
Discount Bank will report a pretax capital gain of NIS 950 million in the sale. As “Globes” reported yesterday, it will use the proceeds to take over Union Bank of Israel (TASE: UNON) for about the same amount as it received for the sale of its mutual and provident funds.
Yesterday afternoon, after receiving bids from contenders, Discount Bank conducted a pricing between Clal Insurance and Migdal, which Clal Insurance won. Clal Insurance will pay NIS 600 million for Ilanot Discount Ltd., which manages NIS 14.6 billion in mutual funds. The price reflects a value of NIS 41 million per billion shekel of assets managed.
Clal Insurance will pay NIS 710 million for Discount Bank’s provident funds, which manage NIS 17.4 billion in assets. Clal Insurance bought the provident funds, not the management company, and can therefore cost the expense as the purchase of an asset. Clal Insurance can now deduct goodwill over time, and reduce the cost of the deal by up to NIS 280 million.
A source close to Migdal believes that, following its defeat in the Discount Bank tender, Migdal would make a greater effort to acquire Psagot Financing Ltd. “Izzy (Migdal CEO Izzy Cohen) will spend whatever it takes to buy Psagot,” he said.
Figures obtained by “Globes” indicate that revenue from management fees for Discount Bank’s provident funds is NIS 142 million a year, and their net profit is NIS 41 million a year. Ilanot Discount’s figures indicate that it posted a net profit of NIS 32 million on NIS 143 million in revenue in 2004.
Last night, Discount Bank notified the Tel Aviv Stock Exchange (TASE), “Following a report by “Globes”, the bank confirms that it is negotiating to take over Union Bank.”
Following the report, Union Bank’s share rose 6%. Discount Bank’s share rose 3% on the sale of its mutual and provident funds.
Published by Globes [online], Israel business news - www.globes.co.il - on November 9, 2005