Hapoalim may distribute Isracard as dividend in kind

Shari Arison, photo: Tamar Matsafi
Shari Arison, photo: Tamar Matsafi

The bank would prefer to sell Isracard, but there is a shortage of buyers.

Bank Hapoalim (TASE: POLI) controlling shareholder Shari Arison has undertaken to refrain from discrimination against the other shareholders in the bank if shares in the Isracard credit card company are distributed as a dividend in kind.

Bank Hapoalim announced three weeks ago that it was simultaneously considering a number of ways of selling credit. The Strum Law requires the bank to complete the sale of Isracard in the next 3-5 years. The options are the sale of a controlling interest in the company, a TASE IPO, and distributing Isracard shares to Bank Hapoalim shareholders as a dividend in kind. It is also likely that an option combining two or more of these possibilities will be chosen.

In principle, if Isracard shares are distributed as a dividend in kind, Arison will receive a 20% stake (the same stake she has in Bank Hapoalim), ostensibly giving her control of Isracard. Bank Hapoalim is making it clear now, however, that even if this option is selected, Arison will receive no premium or control whatsoever in the credit card company.

"Arison will sell enough shares to keep her holdings in Isracard from exceeding 5%," the Bank Hapoalim announcement stated. Even before her stake drop to 5% or less, her voting rights in Isracard will be at most 5%, and she will neither propose nor appoint a director in Isracard.

It is also possible that Arison will sell 20% of Isracard as a controlling core, and receive a control premium for it. In order to prevent a situation in which Arison benefits from a control premium not received by the other Bank Hapoalim shareholders, Arison has undertaken to share any control premium in respect of a sale of an Isracard controlling interest with the other bank shareholders, according to the bank's announcement.

Each of the options for relinquishing Bank Hapoalim's ownership of Isracard has advantages and disadvantages. In the event of an IPO, for example, the bank will receive a capital gain, while if it distributes its shares as a dividend in kind, it will receive no capital gain; the only beneficiaries will be its shareholders. Divesting through a dividend is therefore less attractive to the bank, but it is easier and quicker to carry out. It appears that Bank Hapoalim, managed by CEO Arik Pinto, wishes to keep its options open, especially in view of the fact that there are many financial entities up for sale, and not many buyers.

Published by Globes [online], Israel Business News - www.globes-online.com - on April 25, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Shari Arison, photo: Tamar Matsafi
Shari Arison, photo: Tamar Matsafi
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