Sources inform "Globes" that the Israel Defense Forces (IDF) have first refusal rights for Bank Otsar Hahayal Ltd. through Hever (the IDF and security forces servicemen and pensioners NGO), which owns 24% of the bank. Its rights enable the IDF to veto any buyer proposed by Bank Hapoalim (LSE: BKHD; TASE: POLI) for its shares, as well as the right to buy Bank Hapoalim’s stake at the price offered by a third party.
Bank Hapoalim must sell its controlling interest in Bank Otsar Hahayal by the end of the month. On Sunday, Governor of the Bank of Israel Prof. Stanley Fischer announced that if Bank Hapoalim takes immediate concrete steps to sell its stake, he would consider giving it a three-month extension to complete the process.
A top IDF official confirmed the report, saying that the IDF was studying the matter, and would decide later what to do about its first refusal rights. “All the parties involved are aware of our first refusal rights.
”We’ll consider exercising our rights if it is necessary, after examining the bids to acquire the bank, according to the criterion of what’s good for the members, who are our first priority,” the source said. The IDF has hired the services of Prof. Yitzhak Swary in the matter.
Hever is a partner in the controlling interest in the bank, and regularly appoints three regular senior IDF general staff officers as directors in it.
Bank Otsar Hahayal specializes in retail banking for career IDF personnel and their families. First International Bank of Israel (TASE: FTIN1;FTIN5), Union Bank of Israel (TASE: UNON), and Mizrahi Tefahot Bank (TASE: MZTF) have already proclaimed that they intend to acquire Bank Otsar Hahayal. Mizrahi Bank’s chances are considered small, however, given the uncertain relations between Mizrahi Bank CEO Eli Yones and executives at Bank Hapoalim, from which Yones was forced to resign.
A senior banking source said that, given Bank Otsar Hahayal’s strategy, a price of 150% of equity was not excessive, and the bank would is therefore expected to be sold for NIS 750-900 million. Since the beginning of 2005, Bank Otsar Hahayal has earned a NIS 52 million profit and a 12.16% return on capital, compared with 10.86% in all of 2004. Mati Tal is general manager of Bank Otsar Hahayal, which has NIS 634.5 million in equity.
Bank Hapoalim said in response that it would manage the sale under the assumption that Hever wished to retain its share in Bank Otsar Hayahal. “The bank will coordinate its actions with Hever on the basis of their many years of strategic partnership,” Bank Hapoalim added.
Published by Globes [online] - www.globes.co.il - on December 14, 2005