Sources inform ''Globes'' that the Bank of Israel will oppose the sale of Shufersal Ltd. (TASE:SAE) to the Bronfman family, unless it sell its stake in Israel Discount Bank (TASE: DSCT). A well-informed source said, "No fooling around: they have to decide, either Shufersal or Discount Bank."
As far as the Banking Supervision Department is concerned, the acquisition of Shufersal by Matthew Bronfman, the controlling shareholder in Discount Bank, is a gross breach of the rules set by the committee of overconcentration in the economy regarding the control of both financial and non-financial companies by the same controlling shareholders.
The Bank of Israel dismisses the Bronfman family claim that Matthew Bronfman is just a small part of Discount Bank's controlling core as he directly owns only 2% of the bank. As far as the Bank of Israel is concerned, if he acquires Shufersal, he and his family cannot own the controlling core of Discount Bank, even though the overconcentration committee has not yet submitted its final recommendations and neither the government nor the Knesset has passed legislation.
However, the Bank of Israel does not have the authority to approve or reject the Shufersal deal; that authority lies with Antitrust Authority director general David Gilo. He will have to make a decision by December 8, according to the timetable for closing the deal set out in the agreement between Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH) and the buyers.
Matthew Bronfman and his partner Shalom Fisher, together with Leo Noe will acquire 46% of Shufersal from IDB unit Discount Investment Corporation (TASE: DISI) for NIS 2.4 billion and become the supermarket chain's controlling shareholders. Bronfman Fisher Investments currently own 18.6% of Shufersal through Isralom Properties Ltd. The Bronfman family acquired a 15.1% controlling interest in Discount Bank in 2006.
The overconcentration committee recommends that the controlling shareholder of a major financial company, of which Discount Bank counts as one, cannot simultaneously own a large non-financial company. A large non-financial company is defined as a company with at least NIS 8 billion in annual revenue; Shufersal has over NIS 11 billion, and so fits the criterion.
The Bank of Israel expects the Bronfmans to submit the structure of the proposed acquisition of Shufersal and for the sale of its holding in Discount Bank. Since there is little likelihood of a sale of the controlling core of Discount Bank to a third party since banks are not worth buying right now, the Bank of Israel is preparing for the sale of the Discount Bank stake through the capital market. If that happens, Discount Bank will be left without a controlling shareholder.
The Banking Supervision Department is unperturbed by such a result, since Amendment 13 to the Banking (Licensing) Law (5741-1981) regulates a bank with no controlling core (known as the "Marani law"). Unlike in the past, the Bank of Israel is now comfortable with Discount Bank's current management under chairman Yossi Bachar, a former director general of the Ministry of Finance, and CEO Reuven Spiegel.
The Bank of Israel therefore intends to speed up passage of the Marani law, which allows a shareholder with a stake of 2.5% of more of a bank to propose just one candidate to the bank's board of directors. The amendment also stipulates the establishment of a public committee which will propose an unlimited number directors, or appoint them if two consecutive general shareholder meetings are unable to reach a majority in favor of candidates.
Amendment 13 has been sitting in the Knesset Finance Committee for several months.
Published by Globes [online], Israel business news - www.globes-online.com - on October 23, 2011
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