Government seeks approval to sell its Bank Leumi stake

Shares to be sold to further privatization process.

By SHARON WROBEL
June 14, 2010 22:48
2 minute read.
Finance Minister Yuval Steinitz (Ariel Jerozolimsk

yuval steinitz 311. (photo credit: Ariel Jerozolimski)

Finance Minister Yuval Steinitz on Monday asked the Knesset Finance Committee to allow the government to sell its 11.46 percent stake in Bank Leumi.

“In the privatization process, the sale of the government’s shares will be sold without creating a controlling core in the bank,” the Finance Ministry said in a statement. “The Bank Leumi stake will be sold by the accountant general through block trades using financial institutions, which will offer the shares to investors in Israel and abroad.”

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The government’s 11.46% stake in Leumi is worth about NIS 2.5 billion, out of which 10.5% will be allocated for sale to the public and the remainder to the bank’s employees, the statement said.

The government plans to sell its shares in blocks to institutions until the end of the year, the statement said.

The size of the share packages to be offered each time will be set by Accountant General Shuky Oren according to market conditions, it said.

“The decision to sell the shares in this way was taken after it became apparent that chances of selling a controlling stake in the bank to a strategic investor is very low,” the statement said.

Following the announcement, Bank Leumi shares rose 0.9% on the Tel Aviv Stock Exchange.

Leumi is the last of the country’s lenders to remain under government control, after the government took over the major banks two decades ago. The government has been seeking potential buyers, mostly among foreign lenders, since 2007.

After several attempts to find a buyer or investor for a controlling core failed, the government decided to complete the privatization of Bank Leumi through block trades.

Since the beginning of the year, businessman Shlomo Eliyahu, Bank Leumi’s largest private shareholder, with a 9.59% stake, has expressed interest in forming a group to gain control of the bank, but without success.

To sell its Leumi shares without creating a controlling core, the government needs to amend the so-called Marani Law in the Banking Ordinance, so that shareholders can appoint board members at banks without a controlling shareholders permit.

The Finance Ministry and the Bank of Israel said they would advance the amendment in the coming days. The Finance Ministry expects it to be passed by the end of the year.

At the beginning of the year, the government announced that it would try to sell its remaining shares in the country’s banks over the course of 2010 through the capital market.

In January, Deutsche Bank won the bidding for 5% of the government’s 25% stake in Israel Discount Bank, in a deal worth NIS 435 million.

At the beginning of the year, the Finance Ministry said it expected the sale of the government’s stakes in Israel Discount Bank and Bank Leumi to raise NIS 4b.

Bloomberg contributed to this report.


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