First International Bank of Israel (TASE:FTIN1; FTIN5), controlled by Zadik Bino, is unlikely to join the Tel Aviv 25 Index, despite a capital consolidation of its shares this coming Sunday. Every five regular shares (NIS 0.01 par value) in its series 1 will be converted to one of series 5 (NIS 0.05 par value) share. Only the bank's series 5 share will be traded from September 20.
The series 5 share will continue being traded on the Tel Aviv 75 Index, but after the consolidation, with a market cap of NIS 5.6 billion, First International will be competing for the first time for a place on the Tel Aviv 25 Index.
When the idea of the consolidation first came up a year ago, First International was assured a place on the Tel Aviv 25 Index, but since then things have changed. The Tel Aviv Stock Exchange (TASE) has changed the rules regarding moving from one index to another and there has been a surge in the market caps of gas exploration companies Avner Oil and Gas Ltd. (TASE:AVNR.L), Delek Drilling Limited Partnership (TASE:DEDR.L), and Isramco Ltd. (Nasdaq:ISRL; TASE:ISRA.L), raising the bar for entry to the blue chip index. The next changes in the composition of the Tel Aviv 25 Index will be decided on December 15 depending on market caps as of November 30.
At present there are two obstacles impeding First International's inclusion in the Tel Aviv 25 Index. First, although the bank's market cap is the 23rd highest, the gap with Oil Refineries Ltd. (TASE:ORL), the share with the current lowest market cap on the Tel Aviv 25 Index, is 14%, and Oil Refineries is in 28th place. First International has a market cap of NIS 5.6 billion and Oil Refineries has a market cap of NIS 4.96 billion.
According to the rules, to assure its inclusion in the index, First International must be in at least 20th place in market value of shares relevant to the index, while the outgoing share must be 30th or lower in market value.
An additional problem is the level of holdings of parties of interest which does not permit First International's inclusion in the index. Zadik Bino's FIBI Holdings Ltd. (TASE:FIBI)(54.33%) and Israel Discount Bank (TASE:DSCT) (26.45%) takes it over 80%. But to be included on the Tel Aviv 25 Index at least 25% of shares must be in the hands of people who are not parties at interest.
This problem will be solved when Israel Discount Bank sells 6% of the bank's shares, as is expected.
Published by Globes, Israel business news - www.globes-online.com - on September 16, 2010
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