A Bank Hapoalim branch in Tel Aviv.
(photo credit: REUTERS)
Shari Arison is selling 49% of Arison Holdings, which holds the controlling stake in Bank Hapoalim, the bank reported to the Tel Aviv Stock Exchange Sunday morning.
A memorandum of understanding on the deal has been signed with an investment firm and financial institutions from North America. The buyers insist on anonymity at this stage, but they are believed to be entities that manage billions of dollars and that currently have almost no activity in Israel.
The consideration for the shares will be calculated according to Arison Holdings' shareholders' equity, on the basis of a price of NIS 24.82 per share for Bank Hapoalim, which represents a premium of 2.8% over the base price of the bank's shares on the Tel Aviv Stock Exchange this morning.
This price gives a total consideration of some NIS 3.3 billion for the shares being bought. This is not, however, the actual amount that Arison will receive, as the deal is for the sale of shares in Arison Holdings, which will mean taking into account the group's other assets and its debts, and additional components, so that the sum accruing to Arison will probably be lower than the total deal amount.
The Arison group has a substantial debt to bondholders, but sources close to it say that the aim of introducing these investors is to carry out new investments, and not to reduce debt. Several steps have been taken in the past two years to lower the group's financial leverage.
The buyers are not investment funds seeking to improve the bank's profitability and make a quick profit on the deal, but entities making a long-term investment and able to assist Bank Hapoalim in its plans for expansion in the US.
Bank Hapoalim is currently under investigation by the US authorities on suspicion of having helped US customers evade taxes. It is somewhat surprising that US investors would agree to invest in the bank despite the fact that this cloud still hangs over it.
Bank Hapoalim states that there is no certainty that a final agreement will be signed, and that in any case any deal is subject to a due diligence examination by the investors, and regulatory approvals, such as from the Bank of Israel, which could take months to obtain. The parties also need to agree on such matters as representation on Bank Hapoalim's board. Control of the bank is expected to remain with Arison, who will still hold 51% of Arison Holdings.
The Bank of Israel is aware of the deal being put together, and has given initial approval for it. It views the kind of investors that Arison is bringing into Bank Hapoalim in a positive light. Arison Holdings made enquiries at the Bank of Israel and disclosed to it the identities of the parties with which it is negotiating, before the release of today's announcement. Nevertheless, the Bank of Israel will not give official approval before it has carried out a thorough examination of the entities concerned.