Troubled European bank Dexia Group continues to look for a buyer for its Israeli subsidiary Dexia Israel (Public Finance) Ltd. (TASE:DXIL). Sources inform "Globes" that various bodies have recently contacted senior Discount Bank executives and offered for them to buy Dexia Israel. They describe the offer as a "window of opportunity," after talks between Dexia and Mizrahi Tefahot Bank (TASE:MZTF) were broken off, and after Dexia rejected an offer from Bank of Jerusalem (TASE: JBNK).
In the past, Discount Bank has shown interest in buying Dexia Israel and at the end of 2010 even issued a letter of intent on the matter. Dexia declined to comment on this latest report.
Discount Bank has yet to respond to the offer but market sources believe that it will not make an offer to purchase. The problem is not the price, which is expected to be around Dexia's market cap, but rather the management effort that will be required for the acquisition and to merge and integrate Dexia's activities into Discount's activities. There is also a doubt as to whether buying Dexia's is in line Discount Bank's new strategy, while management is dealing with a major early retirement program, and merging the activities of Discount Mortgage Bank with the main bank.
Theoretically, Dexia has a major advantage in that it only handles municipal credit and has an exceptional concentration of credit, and it will be required to hold particularly high capital adequacy of 18%, giving it a significant capital surplus. Thus the bank buying it will receive a capital surplus for its use.
However, a check carried out by Discount Bank found that the capital surplus will not be expressed until a full merger between Discount and Dexia is completed - a process that would take several years.
Published by Globes, Israel business news - www.globes-online.com - on April 30, 2012
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