Bank Hapoalim (TASE: POLI) is unloading its holdings in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS). Sources inform "Globes" that the bank sold 4.5-5.5% of Clal Insurance's shares to investment institutions yesterday for NIS 160-200 million.
The shares were distributed by IDB group company Epsilon Underwriting & Issuing at NIS 64 per share, reflecting a 1.58% discount on Tuesday's closing price.
Yesterday's distribution of shares was in the framework of agreements reached in mid-October by Bank Hapoalim with IDB Development, which holds 29.8% of Clal Insurance. Under these agreements, Bank Hapoalim gave IDB a period in which to find a buyer for all of its holdings at NIS 62 per share in off-floor transactions. This period expires on November 10. If all of the shares are not sold by that date, Bank Hapoalim will be authorized to sell them.
Bank Hapoalim held 9.5% of Clal Insurance before the sale. In its notice to the Tel Aviv Stock Exchange (TASE) in mid-October, the bank said that if all of the shares it holds were sold, it would post a NIS 119 million pre-tax capital gain in the fourth quarter of 2019.
Only half of Bank Hapoalim's holdings were sold in yesterday's distribution of shares. The bank can continue selling the rest of its shares independently. Until then, Bank Hapoalim will record a capital gain only on the shares that were actually sold.
At the same time, IDB can sell the rest of the shares until tomorrow through a swap deal with a bank, thereby obtaining NIS 2 more per share for all of Bank Hapoalim's holdings.
If a swap deal takes place, it will be according to the principles set in previous swap deals by IDB for selling 25% of the Clal Insurance shares it owns. These principles state that at the end of 24 months from the time of any sale deal, an accounting will take place between IDB and the bank with which the swap deal was conducted on the difference between the price at which the shares were sold and their value when the accounting takes place.
The value on the accounting date will be determined according to the price at which the shares are sold bythe investors with which the bank made the swap deal. This accounting creates exposure to Clal Insurance shares for IDB, and the bank therefore holds a lien on the deposits provided by IDB for the deals. As of the end of August, IDB held NIS 303 million in these attached accounts, and the amount should increase if the market value of the Clal Insurance shares falls.
Since May 2017, IDB has sold 25% of Clal Insurance's shares in accordance with the schedule set by the director of the Ministry of Finance Capital Markets, Insurance, and Savings. Under this schedule, IDB is obligated to sell 5% of the shares in the controlling interest in Clal Insurance every four months, after IDB failed to obtain a renewed permit to hold a controlling interest in Clal Insurance.
The previous sales of shares in early September lowered IDB's holdings in Clal Insurance to less than 30%, the minimum controlling interest in an insurance company. Clal Insurance's current market cap is NIS 3.7 billion, after the share price rose 7% in the past week.
Published by Globes, Israel business news - en.globes.co.il - on November 8, 2018
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