In a notice to the Tel Aviv Stock Exchange (TASE), Bank Hapoalim (TASE: POLI) has officially admitted for the first time that it is in talks to acquire Israel Discount Bank of New York from Israel Discount Bank (TASE: DSCT). "Bank Hapoalim is undertaking a review of a possible acquisition of Discount Bankcorp Inc., and it is seeking to move forward in the process to enable the bank to complete the due diligence."
A year ago, "Globes" reported that the parties were in talks on the subject. The talks continued on and off over the past 12 months, and were apparently recently resumed.
Discount Bank decided to sell Discount New York subsidiary in order to improve its capital structure. Discount Bank is reportedly asking for a price of around Discount New York's equity of $900 million. Bank Hapoalim, however, will reportedly pay less.
Discount Bank chairman Yossi Bachar and outgoing CEO Reuven Spiegel initiated the sale of Discount New York. It hired JPMorgan and Sandler O'Neill to advise on the sale.
In principle, Bank Hapoalim is interested in acquiring Discount New York. Bank Hapoalim chairman Yair Seroussi and CEO Zion Keinan want to expand its international activity, not in exotic markets, but by expanding in two niches that they see has having low risk growth potential: private banking in Europe, and commercial banking in the US.
Bank Hapoalim wants to expand internationally because it is Israel's largest bank and has little growth potential in the domestic market. Israel's low interest rate, falling bank fees, and falling demand for credit have caused the bank's heads to seek new growth engines abroad. In the past, it considered acquiring foreign banks, before dropping the idea.
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2013
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