Union Bank of Israel (TASE: UNON) is holding a rights offering to boost its capital. On Sunday, a general shareholders' meeting approved a NIS 150 million rights offering.
Union Bank's capital adequacy ratio was 11.53% at the end of 2008. The rights issue is aimed at achieving the Bank of Israel-mandated 12% capital adequacy ratio at the end of 2009, and increasing credit by 2%.
In a separate development, the Ministry of Finance allocated guarantees to Union Bank funds from the government's bank guarantee program for the raising of NIS 308 million in Tier-2 capital.
Bank Leumi (TASE: LUMI), which owns 6.46% of Union Bank, will not participate in the rights issue. As a consequence, Bank Leumi's stake will be diluted. Bank Leumi's decision is in line with Supervisor of Banks Rony Hizkiyahu's position to reduce cross-ownership among the banks.
Shlomo Eliahu is the largest shareholder in Union Bank, with a 27.12% stake, followed by Yeshayahu Landau, with 21.55%, and Yitzhak Manor, with 19.63%.
A rights issue is a way for a company to increase shareholders' equity. Current shareholders have the right to buy shares, usually at preferential terms, based on their proportionate stake in the company. Shareholders who do not participate in the rights offering will see their holdings diluted.
Union Bank's share rose 3.6% by midday to NIS 9.08.
Published by Globes [online], Israel business news - www.globes-online.com - on April 30, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009