After 26 years, the Ministry of Finance has decided to sell the government's stake in Bank Leumi (TASE: LUMI) once and for all by privatization through the capital market. Minister of Finance Yuval Steinitz today ordered Accountant General Shuki Oren to submit a plan to distribute the shares through the capital market. Sources inform ''Globes'' that the Ministry of Finance intends to carry out the distribution by the end of the year.
During a ministry meeting last week, Steinitz said, "The privatization of Bank Leumi has to be expedited, even at the cost of no controlling core."
Oren, who serves as chairman of MI Holdings (State of Israel Properties), which holds the government stake in the bank, will first pick an investment bank to handle the distribution. The government previously used UBS AG (NYSE; SWX: UBS), Citigroup Inc. (NYSE: C), and Deutsche Bank AG (NYSE: DB; XETRA: DTEG) for the distribution of shares.
Bank Leumi's current market is nearly NIS 20 billion, after a 73% rise in its share since the beginning of the year. The government owns 10.3% of the bank through State of Israel Properties, and an additional 1.1%, which will be allotted to Bank Leumi employees when the sale of the state's shares is completed. The sale of the shares through the capital market should therefore generate NIS 2 billion for the Ministry of Finance, which will be used to reduce the budget deficit.
The Ministry of Finance's last attempt to sell its stake in Bank Leumi collapsed in January, when NM Rothschild & Sons could not find a foreign investor or bank to bid for the controlling core. The ministry attributed the failure to the poor conditions in the global financial market and the credit crunch at the time.
Following the sale of the government's stake in Bank Leumi, the bank will be run in accordance with the Marani amendment, enacted in 2004. The amendment aims to solve the problem of control of a bank that has no controlling core, which results in the power to nominate directors going to the shareholders. They will have to take an active role and vote in general shareholders meetings on the candidates for directors. The Marani amendment details how to run a bank without a controlling core, who appoints directors, who has actual control, and how the Bank of Israel will supervise.
The sale of the government's stake in Bank Leumi will give Shlomo Eliahu, its largest shareholder with a 9.59% stake, an opportunity to consolidate a controlling core for the bank. He has said in the past that will have no trouble organizing a group of investors that would create a stable controlling core that would own the 20% demanded by the Bank of Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on September 22, 2009
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