Mizrahi in talks to buy Dexia Israel

Dexia's departure is part of the bank's streamlining measures and a refocus on its core markets, which do not include Israel.

Franco-Belgian bank, Dexia (Euronext: DXB; LSE: DEX) has initiated negotiations with Israeli banks to sell its 65% stake in Dexia Israel (Public Finance) Ltd. (TASE:DXIL), because it wants to quit activity in Israel. Sources inform ''Globes'' that Dexia is in contact with at least two banks, one of which is Mizrahi Tefahot Bank (TASE:MZTF), headed by CEO Eli Yones.

Mizrahi Tefahot Bank declined to comment on the report.

Dexia is asking NIS 600 million for Dexia Israel, reflecting a multiple of 1.1 on its shareholders' equity, and 50% higher than its market cap.

A source close to the talks said that the price tag was "very high, unacceptable, and intended only as an opening gambit in the negotiations."

Dexia wants to sell Dexia Israel to an Israeli bank in order to expedite regulatory approval. The sources also believe that, in order to facilitate a sale, Dexia plans to make an offer to purchase Dexia Israel shares. The public currently owns 35% of Dexia Israel, worth NIS 138 million.

Dexia's departure from Israel is part of the bank's streamlining measures and a refocus on its core markets, which do not include Israel. The French and Belgian governments nationalized Dexia in September 2008, when the bank was on the verge of bankruptcy during the economic crisis. Another reason is internal lobbying in Belgium for Dexia to quit Israel for political reasons.

Dexia Israel, headed by CEO David Kapah, is a small bank with one branch. It specializes in credit to municipalities, which account for 87% of the bank's credit to the public. Dexia Israel has the largest share of the municipality credit market, with 36%, ahead of Bank Hapoalim (TASE: POLI) with 31%, and Bank Leumi (TASE: LUMI), with 25%.

Kapah denied the report, saying, "Rumors about the sale of the bank are groundless. Dexia considers its Israeli subsidiary as an important arm, and the business activity between the parent company and Dexia Israel continues as usual."

Dexia Israel's share price rose 0.6% today to NIS 532.90, giving a market cap of NIS 399 million.

Published by Globes [online], Israel business news - www.globes-online.com - on June 27, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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