Bank Hapoalim (LSE:BKHD; TASE:POLI) reached an agreement with Hever (the IDF and security forces servicemen and pensioners NGO) last night, under which the bank will acquire Hever’s first refusal rights to Bank Otsar Hahayal Ltd.. Hever owns 24% of Bank Otsar Hahayal. Bank Hapoalim will reportedly give Hever assets, such as real estate with a value of NIS 58 million.
Hever has made a remarkable achievement: all its demands were accepted. Under the agreement, Hever will receive a five-year Put option on the sale of Bank Otsar Hahayal shares at the price at which Bank Hapoalim sells its controlling interest. Hever also received tag along rights to join Bank Hapoalim’s sale of Bank Otsar Hahayal on the same terms.
Bank Hapoalim may act on Hever’s behalf in the sale of Bank Otsar Hahayal, thereby neutralizing Hever’s first refusal rights. This makes the sale of Bank Otsar Hahayal possible. The Bank of Israel ordered Bank Hapoalim to sell Bank Otsar Hahayal by February 4.
Following the agreement with Hever, Bank Hapoalim said, “We can now speed u p negotiations with potential buyers for Bank Otsar Hahayal.”
The main candidates for Bank Otsar Hahayal will be Mizrahi Tefahot Bank (TASE:MZTF) and First International Bank of Israel (TASE: FTIN1 ;FTIN5). Last week, Mizrahi Bank made a public offer to buy Bank Hapoalim’s 68% stake in Bank Otsar Hahayal at a record company value of 153% of Bank Otsar Hahayal’s shareholders’ equity. The offer reflected a company value of NIS 971 million for Bank Otsar Hahayal, compared with the bank’s shareholders’ equity of NIS 634 million.
A number of foreign entities have also expressed an interest in buying Bank Otsar Hahayal, but sources in the banking system do not think any foreign buyer will pay 150% of shareholders’ equity for the bank.
In its balance sheet, Bank Hapoalim reports the value of Bank Otsar Hahayal at NIS 395 million. If it sells Bank Otsar Hahayal at the price offered by Mizrahi Bank, Bank Hapoalim will make an after-tax capital gain of NIS 160 million.
Published by Globes [online], Israel business news - www.globes.co.il - on January 10, 2006