Bank of Jerusalem offers NIS 515m for Dexia Israel

Bank of Jerusalem (TASE: JBNK) has offered NIS 515 million for Dexia Israel (Public Finance) Ltd. (TASE:DXIL) in a cash and share swap deal: 75% in cash and the rest in Bank of Jerusalem shares at a value equal to its balance sheet total, or 18% of its shares. Dexia Israel's minority shareholders will reportedly accept the offer.

Mizrahi Tefahot Bank (TASE:MZTF) has already made an offer for Dexia Israel, which mainly grants municipal credit.

Bank of Jerusalem CEO Uri Paz told "Globes", "This is an offer that should benefit all the parties. We believe that we can reach a deal in negotiations to settle Dexia's complex structure that will meet the various needs of its different shareholders. For the Bank of Jerusalem, this is an important step, which, if it succeeds, will be the foundation for greatly growing the bank's profits and profitability. Merging Dexia Israel and the Bank of Jerusalem will create another financial bloc to enable Bank of Jerusalem to achieve its growth plan, while distributing regular dividends."

A merger will benefit both banks. The merged bank would be about the same size as Israel's sixth largest bank, Union Bank of Israel (TASE: UNON), in terms of credit and NIS 700 million in shareholders' equity. It will be able to offer cheaper sources of financing and improve the bank's liquidity on the Tel Aviv Stock Exchange (TASE), while meeting Dexia Israel's minority shareholders' demands for equal rights.

Dexia Bank SA (Euronext: DEXB) owns 65% of Dexia Israel, and has sought to sell it under pressure from pro-Palestinian organizations. Dexia Bank recently announced that it will sell Dexia Israel by the end of the summer.

Dexia Israel has a 38% share of the municipal credit market, which accounts for 88% of the bank's lending. The bank is traded at a market cap of NIS 490 million, a multiple on equity of 0.85, and it shareholders' equity is NIS 573 million. Its acquisition will give the Bank of Jerusalem another foothold in the municipal credit and credit for infrastructures markets.

Dexia Israel's share price rose 0.1% today to NIS 652. The Bank of Jerusalem's share price rose 0.6% today to NIS 5.44, giving a market cap of NIS 381 million.

Published by Globes [online], Israel business news - www.globes-online.com - on May 30, 2011