Sources inform ''Globes'' that Israel Discount Bank (TASE: DSCT) is selling its 5.97% holding in Harel Insurance Investments and Financial Services Ltd. (TASE: HARL). The bank has owned the stake for nine years. The stake is worth NIS 197 million.
Discount Bank president and CEO Giora Ofer no longer feels that the stake in Harel is a strategic holding, and the 69% rise in Harel's share price since the beginning of the year means that now is a good time to sell.
The Hamburger family owns 41% of Harel, whose chairman is Yair Hamburger. With a market cap of NIS 3.3 billion, Harel is Israel's third largest insurance company. Its market cap is still 35% below is level before the financial crisis.
Discount Bank will not make a capital gain on the sale, because it books the value of the holding at Harel's market value. However, a sale will improve the bank's capital adequacy ratio, because the allocation of capital necessary for holding shares is larger than the allocation needed for cash or deposits. Banking sources believe that this is the reason for the sale.
The Hamburgers reportedly do not want to buy the shares, since they have already agreed to buy another 10.1% in Harel from Indonesia's Sampoerna Group of Companies (Jakarta: HMSP). This purchase will boost the Hamburgers' holding to over 50%.
If Discount Bank sells its Harel holding to a party that will own more than 5% of Harel, it will have to obtain the approval of Supervisor of Capital Markets, Insurance and Savings Yadin Antebi, who will conduct due diligence on the buyer.
Discount Bank declined to comment on the report, and Harel was unavailable.
Harel's share fell 2.9% by midday today to NIS 156.30. Discount Bank's share rose 1% to NIS 5.15.
Published by Globes [online], Israel business news - www.globes-online.com - on July 16, 2009
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