The Israeli government's right to vote on behalf of Bank Leumi (TASE: LUMI) employees will expire after the bank's next general shareholders meeting in June. The government, through MI Holdings (State of Israel Properties) owns 11.46% of the bank's shares and voting rights, and also has power of attorney on the employees' voting rights, which amount to 2.74% of the total voting rights. Altogether, the government has voting rights to 14.2% of Bank Leumi.
The power of attorney on the employees' voting rights will be important at the upcoming general shareholders meeting on June 2, where, for the first time, the government's candidates to Bank Leumi's board of directors will have to compete against independent candidates and nominees of other shareholders.
On June 13, the four-year vesting period of the employees' shares will expire, and the government will no longer have power of attorney on their voting rights. Most employees will reportedly quickly sell their shares.
The employees' gain from the difference between the share's current price and the purchase price in 2006, assuming all the shares are sold, is NIS 228 million. The employees' total gain from Bank Leumi's privatization is NIS 600 million.
When Cerberus Capital Management LP-Gabriel Capital Management consortium won the Bank Leumi privatization tender in 2006, the bank's employees received 2.87% of the bank's shares, and bought 2.74%. The employees also had the right to buy an additional 1% of the bank from the government's holding, but since the privatization was never completed, the employees never had this chance.
As per the usual practice in privatization, Bank Leumi's employees received a 25% discount on the price at which the government will sell its shares in the bank. They bought the shares at NIS 11.65, compared with today's opening price of NIS 17.30, reflecting a 48.5% yield, or 10.5% a year over the four years.
Published by Globes [online], Israel business news - www.globes-online.com - on April 6, 2010
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