Bank Hapoalim on Sunday agreed to sell off its mutual funds management arm, Poalim Mutual Funds Ltd. (P.K.N.), to Solomon Capital Markets for NIS 955 million.
The price represents NIS 46m. for each NIS 1 billion in assets managed by PKN.
"The deal is a significant step for Solomon, as the investment house has been trying to win market share in the mutual funds market," said Yuval Ze'ev, analyst at Clal Finance Bituach, a subsidiary of Clal Insurance, which was amongst the bidders for P.K.N.
"Therefore, they are willing to pay a premium - the price reflects about NIS 12m more (per billion of managed assets) than Harel Insurance paid for Bank Leumi's asset management arm Leumi Pia last month," Ze'ev added.
Migdal Insurance was another bidder in the auction.
P.K.N., with a market share of 15.5 percent, is the largest manager of mutual funds in Israel's economy. It has NIS 20.5 billion under management in 74 separate funds.
Bank Hapoalim said the deal was expected to close in the first quarter of 2006 and that it would post a NIS 500m. net capital gain on the sale.
Solomon Capital Markets is managed by Amit Berger who, a few months ago, bought the controlling interest in the company from its founder, Eli Solomon.
In September, Solomon Capital Markets failed to buy broker Ilanot Discount for NIS 230m. from Nochi Dankner's IDB group after Israel Discount Bank decided to exercise its right of first refusal.
The mutual fund sector has seen a lot of movement over recent months as a result of the recently legislated Bachar capital market reforms which forbid any bank from owning, directly or indirectly, mutual or provident funds.
Banks are under pressure to sell "major" or "other" fund holdings. Bank Hapoalim and Bank Leumi will have to sell their mutual fund units within three years and provident funds within four years. Smaller banks will have up to eight years to sell their units.
Ze'ev added that Bank Hapoalim was mulling the sale or spin-off of another fund management company, Lahak Mutual Funds Management Ltd., with some $4.2b. under its belt in 69 funds.
In the first deal resulting from the recently implemented Bachar reforms, Harel Insurance Investments Ltd. agreed to buy Leumi Pia for NIS 535m.
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