Bank Leumi (TASE: LUMI) has announced the completion of the deal by which US fund Warburg Pincus has acquired Leumi Card at a company value of NIS 2.5 billion. Governor of the Bank of Israel Prof. Amir Yaron approved the sale several days ago. Bank Leumi, managed by Rakefet Russak-Aminoach, receives NIS 2 billion for its 80% stake and Azrieli Group Ltd. (TASE: AZRG), headed by Dana Azrieli, receives NIS 500 million for its 20% stake. Bank Leumi will post a NIS 340 million pre-tax profit.
As the deal is being completed, it was learned that the Menorah Mivtachim Holdings Ltd. (TASE: MORA) insurance group is participating in the deal in both its debt and equity aspects. The insurance group is putting over NIS 500 million of its members and policyholders' money into the deal, as well as its nostro funds.
Warburg Pincus confirmed a previous report in "Globes," saying, "With the change in ownership and the separation from Bank Leumi, the company will be rebranded and change its name to Max." Warburg Pincus European investment manager and executive management group member Daniel Zilberman said, "For us, Leumi Card is an excellent opportunity to get a foothold in Israeli financial activity. We are convinced that with the company's talented and superb staff, we'll be able to create value for the public in payments, credit, and financing."
The Leumi Card deal is the first of the large deals caused by the Promotion of Competition and Reduction of Concentration Law. It will be followed by Isracard, which Bank Hapoalim is required to sell, and will probably do so through a public offering. Market sources believe that Bank Hapoalim will have difficulty obtaining the 30% premium on capital for Isracard that Warburg Pincus paid for Leumi Card when the deal was signed seven months ago.
Warburg Pincus will pay NIS 900 million-1 billion of the Leumi Card deal price from equity, while at the same time, Leumi Card will pay an exceptionally large NIS 600-700 million dividend. Warburg Pincus also borrowed NIS 900 million from a consortium of Israeli investment institutions, led by Harel, with participation from Menorah Mivtachim and Phoenix. As far as is known, Harel will put up NIS 450 million of this credit, Menorah Mivtachim NIS 300 million, and Phoenix NIS 150 million.
Warburg Pincus is taking three local investment institutions as minority partners in the Leumi Card deal: Menorah Mivtachim, Israel's largest insurance and pension group, which will own 10% of Leumi Card; Clal Insurance (10%); and the Allied group, led by Prof. Itzhak Swary (5%). Warburg Pincus will own a 75% controlling interest in Leumi Card, managed by Ron Fainaru and headed by Yaron Bloch. Menorah Mivtachim, Clal Insurance, and Allied Group are acquiring their shares at a company value of NIS 2.5 billion for Leumi Card, the same value at which Warburg Pincus made its acquisition from Bank Leumi and Azrieli Group.
When Warburg Pincus acquired control of Leumi Card last July, it undertook to pay NIS 273 million more in the six years following the deal if Leumi Card outperforms the forecasts presented for it.
Published by Globes, Israel business news - en.globes.co.il - on February 25, 2019
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