The sale of Leumicard is getting underway. Sources inform "Globes" that Bank Leumi (TASE: LUMI) investment arm Leumi Partners Ltd. will begin a roadshow in November. The roadshow is aimed mostly at foreign private equity funds, which have already begun talks with the bank and its investment arm at various levels. Leumi Partners is handling the sale of Bank Leumi's shares in Leumicard.
A senior Bank Leumi source told "Globes" that the bank has made a strategic decision to sell all its Leumicard shares, and that the NIS 3 billion price for the shares was derived from the NIS 2.8 billion value for Leumicard in the Azrieli Group Ltd. (TASE: AZRG) deal, with the addition of a control premium. Leumicard's current equity is NIS 1.8 billion, and Bank Leumi has an 80% stake in the credit card company.
Leumi Partners and Leumicard chairman Yaron Bloch is personally leading the sale, after preparing Leumicard for sale last year. This preparation reached its final stage before the Jewish holidays, and Leumi Partners decided to put the company on a roadshow in the immediate future.
Leumi Partners has several options for selling the company. The first is issuing shares on the stock exchange. This could be a very interesting option for the public, mainly due to the fact that it involves a prestigious offering for a profitable company with a substantial market share in the local economy. It does not appear that the market will have much difficulty in absorbing Leumicard's shares. A senior offerings market source told "Globes," however, that an offering of NIS 2.4 billion in shares was liable to be too big for the local market. "Keep in mind that the investment institutions are exposed to the banking system, and increasing their exposure by the scale of Leumicard is liable to make the weight of financial shares in the institutions' investment portfolio excessive, creating over-exposure to the financial market," the source warned.
The second option is selling Bank Leumi's entire stake in Leumicard to foreign private equity funds - Bank Leumi's preferred option right now. Two or three US or international funds can absorb a sale on this scale. "It's a typical sale for such funds. They have a lot of liquidity, and are looking for investments in companies with good potential. Keep in mind, however, that the Israeli financial market features strict regulation that is liable to keep these funds away from an investment on the scale of Leumicard," a senior source familiar with the particulars of the sale said.
The third option is not Bank Leumi's preference, but it is certainly being considered. It consists of a combination of selling a substantial share in Leumicard to private equity funds and offering the rest of the bank's shares on the stock exchange. Senior capital sources are predicting that the local capital market can absorb up to 40% of the offering (half of Bank Leumi's holding in Leumicard, but there are two problems with this option. The first is that private equity funds are liable to be leery of investing in a company subject to both banking regulation and capital market regulation, with the resulting exposure. The second problem is concern about the lack of harmony in the company's regular management if control is shared by an investment fund and institutions in the capital market.
Bank Leumi said in response, that it would not comment on the sale of Leumicard.
Published by Globes [online], Israel Business News - www.globes-online.com - on October 19, 2017
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