Dexia Bank (Euronext: DEXB) today confirmed that it has received a number of offers for Dexia Israel (Public Finance) Ltd. (TASE:DXIL), and has given a "mandate" for France's Rothschilds & Cie bank to review them.
Dexia is leaving Israel as part of its streamlining measures caused by the financial crisis and a refocus on its core countries, which do not include Israel. The French and Belgian governments nationalized Dexia in 2008 after it verged on bankruptcy. Another reason for the sale of Dexia Israel is lobbying in Belgium to divest from Israel by pro-Palestinian groups.
Dexia specializes in providing credit to municipalities, which account for 88% of the bank's credit. The bank's share price rose 5% today to NIS 682.50, giving a market cap of NIS 489 million, reflecting a return on equity of 0.8.
Dexia will reportedly not want to sell Dexia Israel for less than its shareholders' equity of NIS 587 million. In addition, Dexia will have to first solve the share structure of Dexia Israel, which includes five kinds of shares with different rights and votes: tradable capital shares; non-tradable capital shares; and three kinds of shares that grant rights to appoint directors. This structure discriminates against minority shareholders.
Dexia Israel is a small bank with one branch. It has a 38% share of the municipal credit market, larger than Bank Hapoalim (TASE: POLI) (32%) and Bank Leumi (TASE: LUMI) (23%). Dexia Israel increased its share of this market in recent years and also tried to enter the infrastructure financing market.
As for buyers of Dexia Israel, Bank Hapoalim and Bank Leumi are not in the running as they will not obtain regulatory approval. Israel Discount Bank (TASE: DSCT) could buy it, but it is hard to image CEO Reuven Spiegel making the effort at this time. First International Bank of Israel (TASE: FTIN) has not yet completed its take over of Bank Massad and Bank Otsar Hahayal, and anyway, the acquisition of another small bank in a risky sector does not fit in with the conservative world view of First International Bank's controlling shareholder Zadik Bino.
The Bank of Jerusalem (TASE: JBNK) was once interested in Dexia Israel, but it does not fit the new retail strategy of CEO Uri Paz.
This leaves Mizrahi Tefahot Bank (TASE:MZTF) and Union Bank of Israel (TASE: UNON). It is hard to see what advantage Dexia Israel would bring to Union Bank, which is unlikely to want to invest a quarter of its shareholders' equity in municipal credit.
Mizrahi Tefahot Bank CEO Eli Yones on the other hand has always wanted to expand, and expressed interest in Dexia Israel a year ago. His interest will of course depend on the price.
Another possibility is a foreign bank. A few months ago, Hezi Hermoni expressed interest in Dexia Israel and was seeking an Indian bank to buy the controlling interest in order to enter operations in Israel. We will soon see if he is serious.
Dexia Bank owns 65.34% of Dexia Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on April 10, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011