Israeli banks and investment houses may now participate in the tender for choosing the investment bank to advise the pension fund administration. The administration is privatizing the old pension funds' (founded before January 1, 1995) nationalized new pension fund subsidiaries, Meitavit Pension Fund, Mivtachim Pension Fund and Makefet Fund (founded after January 1, 1995). Pension fund administration director and Mivtachim authorized manager Adv. Yaron Arbel made the decision the today. Nevertheless, two concerns - a foreign bank and a local bank - are expected to be selected.
In early March, the pension fund administration began the process of choosing the financial institution to advise it in the anticipated pension fund tender. The pension fund administration published a request for information (RFI) from a number of foreign banks, including Merrill Lynch (NYSE:MER), Lehman Brothers (NYSE:LEH), HSBC (LSE:HSBA; NYSE:HBC; Paris:PSHB; HKSE:005), and UBS (SWX:UBS). Due to concerns about conflict of interests, the RFI was not sent to Israeli financial institutions. Merrill Lynch later announced that it would not participate in the tender, because it planned to bid for a pension fund, and would therefore face a conflict of interests.
The pension fund administration published a tender to sell Ahdut pension fund last week. Supervisor of Insurance Eyal Ben-Chelouche said "banking corporations, their controlling shareholders, or parties at interest" would not be allowed to participate in the tender at this stage.
The pension fund administration therefore decided that the Ministry of Finance ban on Israeli banks from acquiring pension funds neutralized the risk of conflicts of interests, thereby expanding the number of financial institutions able to participate in the selection of a consultant. Arbel will contact several leading Israeli banks and investment houses tomorrow, to invite them to submit offers. Several financial institutions have already expressed an interest in doing so.
The Ministry of Finance plans to privatize the pensions funds by year-end. Insurance companies are expected to be the main bidders. A senior source close to the pension fund administration said he saw no problem from the insurance holdings by Israel's three largest banks. Bank Hapoalim (LSE:BKHD; TASE:POLI), Bank Leumi (TASE:LUMI), and Israel Discount Bank (TASE:DSCT) are parties at interest in Clal Insurance (TASE:CLIS), Migdal Insurance (TASE:MGDL) and Harel Insurance (TASE:HARL1; HARL5), respectively, which are the leading candidates for acquiring the pension funds.
The three pensions funds to be privatized - Mivtachim, Makefet, and Meitavit - dominate Israel's pension market, with 75% of the new pension fund market. The three funds had 657,000 members altogether and NIS 13.7 billion in aggregate assets in late 2003. Their aggregate receipts amount to almost NIS 3 billion a year.
Published by Globes [online] - www.globes.co.il - on April 19, 2004