Supervisor of Banks David Zaken yesterday notified Ofer Investments Ltd., owned by Yuli Ofer, Liora Ofer, Doron Ofer, and Eyal Ofer, that it must settle the dispute between Yuli and his son, Doron, otherwise it will amend the company's control permit for Mizrahi Tefahot Bank (TASE:MZTF). In the letter, Zaken warned, "Unless you take the necessary measures… you will be in prime facie material breach of the terms of the control permit."
Zaken gave Ofer Investments until September 15 to submit a report on the bank's's investments-to-sources ratio (its leverage), so that the Banking Supervision Department can examine the ratio with regard to the control permit. He warned, "If the condition is violated, I will advise the Governor to exercise his authority under Article 34 to change the current control permit."
Doron Ofer opposes the rest of the family, and opposes separating Ofer Investments' holding in Mizrahi Tefahot Bank from its real estate business, Melisron Ltd. (TASE: MLSR). The separation is necessary following Melisron's acquisition of real estate company British-Israel Investments Ltd. (TASE: BRTS) from Leo Noe and the purchase of the Ramat Aviv Mall from Africa-Israel Investments Ltd. (TASE:AFIL).
In 2009, the Bank of Israel issued a two-year provisional control permit, which allowed Ofer Investments to lower its investments-to-sources ratio from 40% as stipulated in the original 1998 permit, to 30%, and thereby increase its leverage. The provisional control permit expired in June 2011, but the ratio was not increased. The Ofer family therefore decided to separate the two businesses.
Under the proposed separation, the controlling shares in Mizrahi Tefahot Bank will be transferred to a sister company of Ofer Investments, so that its real estate debt will not jeopardize the bank's stability. Liora Ofer's father, Yuli, is prepared to carry out the proposed spin-off, which was presented to the Bank of Israel several months ago, but Doron refuses, effectively torpedoing the deal.
Despite the warning, sources believe that the Bank of Israel is no hurry to carry it out, and that the Bank of Israel wants to compel Doron Ofer to accept the separation. "Most of the controlling shareholders have announced their consent to the immediate separation of the holdings. The delay is due to the position of a small minority," states the Bank of Israel in its warning letter to the company.
Mizrahi Tefahot Bank's share price rose 5% to NIS 31.76, giving a market cap of NIS 6.8 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2011
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