The Ministry of Finance will sell the government's 25% holding in Israel Discount Bank (TASE: DSCT), held through MI Holdings (State of Israel Properties). Accountant General Shuki Oren, who also serves as chairman of MI Holdings, will oversee the sale, on the instructions of Minister of Finance Yuval Steinitz.
The sale will likely take several months to complete, and will put pressure on Discount Bank's share price. Even after the sale, the Bronfman-Schron group will continue to be the bank's controlling shareholder, as it owns 26% of the bank, while no other shareholder will own more than 5%.
The government will sell its Discount Bank shares on the capital market. The share has risen 112% since the beginning of the year, and the bank's current market cap is NIS 1.8 billion. The government will reportedly sell its shares through foreign investment banks, which will distribute the shares in bloc trades of up to 4.99% of the bank's share capital.
Possible distributors include UBS AG (NYSE; SWX: UBS), Goldman Sachs Group Inc. (NYSE: GS), and Deutsche Bank AG (NYSE: DB; XETRA: DTEG).
The Ministry of Finance said in response, "No decision has been taken about the structure of the sale of the shares held by the government."
The government and the Bronfman-Schron group have a cooperation agreement on voting through February 15, 2010. The government appoints five Discount Bank directors under this agreement. When the agreement expires, the Bronfman-Schron group will be able to appoint more directors on its behalf to the bank's board. If the government stake in the bank falls below 10%, it will only be allowed to appoint two directors to the bank's board.
The sale of the government's holding in Discount Bank will enable the Bronfman-Schron group to give former bank chairman Arie Mienkovitch his bonus. Since he left the bank, both Accountant General Yaron Zelekha and his successor, Oren, have blocked payment of Mienkovitch's NIS 10 million severance package and NIS 7 million bonus.
Meanwhile, the Ministry of Finance is pursuing the sale of MI Holdings' 3.01% holding Bank Leumi (TASE: LUMI) through the capital market. In contrast to Discount Bank, where the sale of the government's shares is only financial and will have no effect on the bank's control, the sale of the government's shares in Bank Leumi will result in a change in control of the bank.
Discount Bank's share rose 0.5% in morning trading to NIS 7.22. Bank Leumi's share rose 0.9% to NIS 17.03.
Published by Globes [online], Israel business news - www.globes-online.com - on October 12, 2009
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