Deutsche Bank buys 5% of Discount Bank

Deutsche Bank on Tuesday won the bidding for 5 percent of the government's stake in Israel Discount Bank, the country's third-largest bank, in a deal worth NIS 435 million, or NIS 8.87 a share.

discount bank88 (photo credit: )
discount bank88
(photo credit: )
Deutsche Bank on Tuesday won the bidding for 5 percent of thegovernment's stake in Israel Discount Bank, the country's third-largestbank, in a deal worth NIS 435 million, or NIS 8.87 a share.
"The sale is a success for the State of Israel and represents avote of confidence in the Israeli economy and its financial stability,"Finance Minister Yuval Steinitz said. "As we have already said, we willact to sell the government's remaining holdings in the country's banksover the course of 2010."
On Monday, the Treasury announced that it was offering 5% ofits 25% stake in Israel Discount Bank to 10 international banks, out ofwhich five entered the bidding. As part of the offer, the Treasuryincluded an option for the winner to buy another 3.33% at a 0.5%discount to the price paid for initial shares.
Deutsche Bank on Tuesday evening decided not to exercise the option of buying additional shares.
"The aim of the deal was to take advantage of the high level atwhich the shares of Israel Discount Bank are trading, enabling thegovernment to start the sale process of its holding in the bank,"Accountant-General Shuki Oren said. "The proceeds of the sale willenable us to reduce the need for the issuance of government bonds andto bring down the debt-to-GDP ratio."
Israel Discount Bank shares touched their highest level in ayear on January 4, after more than doubling in 2009. The stock closeddown 4.7% to NIS 8.67 on Tuesday.
Under the terms of the sale, the government, which now holds20% of Israel Discount Bank, has committed itself not to sell anyadditional shares of the bank over the next 90 days. The timing andsize of future lump sales will be decided by the Finance Ministrydepending on market conditions.
"We will be monitoring the success of this equity distributionto the best of our ability to gauge the relative success of theoffering," Joseph Wolf, an analyst at Barclays Capital, said Tuesday."We would expect that the better the market reception to the offering,the more likely it is that the government will accelerate the sale ofits remaining holdings."
Israel Discount Bank intends to issue a rights offering, hesaid, in part to shore up capital and in part to fund continued growthin the retail segment.
"A recent meeting we had with management confirmed that thisshould still be expected in the first quarter of 2010, pending relevantregulatory approvals," Wolf said.
Israel Discount Bank is controlled by the Bronfman-SchronGroup, led by US businessman Matthew Bronfman. It holds a 26% stake inthe bank, which it acquired from the government in 2006.
The government's deal with Deutsche Bank is part of a string ofof privatizations of state-controlled companies. In addition to itsholding in Israel Discount Bank, the state owns a 10% stake in BankLeumi.
The Finance Ministry plans to sell these holdings in a numberof transactions via the stock market in 2010. It expects the sale ofboth stakes to help the country's financing needs by NIS 4 billion.Last month, Barenboim Group Investments, controlled by businessmanZvika Barenboim, won the government tender for the sale of IndustrialDevelopment Bank of Israel, in a deal worth NIS 572m.
Bloomberg contributed to this report.