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Bank Leumi has sold its 15.8 percent stake in Africa Israel Investments Ltd. for NIS 1.12 billion to Russian billionaire Lev Leviev, the controlling shareholder of the investment company - in compliance with the requirements of the Bachar reform.
The Leumi stake was sold at a share price of NIS 150, valuing Africa Israel at NIS 7.08b., which was 2% below its market value on the Tel Aviv Stock Exchange on Wednesday, where the company traded at NIS 153.30. The acquisition will top up Leviev's stake to 80%.
Bank Leumi, which valued its Africa Israel shares at NIS 238 million on its books said it expected to post roughly a NIS 500 million after-tax capital gain from the sale.
"The sale was expected by the market and did not disappoint in terms of the sales price, which was around the trading share price level of Leumi," said Avi Weinreb, a broker at Clal Finance Batucha Investment Management. "The deal will add a few more millions of shekels to the bank's substantial one-time capital gains from sell-offs over the past few months."
Bank Leumi's shares on Thursday rose 0.2%, while Africa Israel shares gained 4.6% closing at NIS 160.
"Leumi's shares saw a rise in anticipation of a chunky dividend in two weeks time following a series of capital gains," said Weinreb.
Bank Leumi told the Bank of Israel about two weeks ago that it intended to sell its holdings in Africa Israel and Migdal Insurance Holdings and Finances Ltd. but retain its 18.4% stake in the Israel Corporation.
"We would not have sold the holdings in the company if we had not been forced to by the regulator," said Bank Leumi chairman Eitan Raff. "Our long partnership generated excellent profits for both groups. The price concluded is fair to both sides."
In mid-October, the Bank of Israel had ordered Bank Leumi to sell off all its holdings in two of its three conglomerates by September 30, 2006, in accordance with a 1996 law forbidding banks from maintaining a stake in more than one "conglomerate" - defined as a company with more than NIS 1.73 b. in equity that is active in more than three areas of business.
Bank Leumi's 19.9% stake in Migdal must, in any event, be reduced to 10% by March 31, 2007, to comply with the Bachar reform.
Bank Leumi has been continuing efforts to convince the central bank that Migdal is not technically a conglomerate, in order to retain a 10% stake. The bank intends to wait until up to March 31, 2008 to be sure that it is in fact required to part with its entire stake in Migdal.
"Generali is tooted to be a potential candidate for the Migdal stake. Generali, similar to Africa Israel, is a controlling shareholder in Migdal," Weinreb noted.