A US-based consortium won a government tender early Tuesday to acquire a 9.99% holding in Bank Leumi with a bid of NIS 2.47 billion, or NIS 17.50 a share, the Finance Ministry said. Barnea Investments, which consists of US firms Cerberus Capital Management and Gabriel Capital, will also acquire an 18-month option to buy another 10.01% and a controlling stake for NIS 14.70 a share. This leaves the government with a holding of just over 4%, most which it plans to divide up among the bank's workers. Should it exercise the option, Barnea would pay a total of NIS 4.62b. for the 20%, which the Bank of Israel sees as a controlling stake. The total price is close to NIS 16 a share, as calculated by Leader analyst Alon Glazer, and reflects a market capitalization of around NIS 23b. compared with a current figure of approximately NIS 21b. Senior executives involved in the consortium couldn't be reached for comment by press time on Tuesday. One of Cerberus's high-ranking managers is former US Vice President Dan Quayle. The winning price caused widespread surprise, as it reflects a 16% premium over Leumi's closing share price of NIS 15.09 on Monday. Even Finance Minister Ehud Olmert said it exceeded the government's hopes. "The price was over and above our expectations," Olmert told a news conference. He also disclosed that the differences between the bids were small. "The other participants offered high prices and they couldn't believe that their bids weren't enough," he said, adding that the government would use the cash to reduce its debt to below 100% of gross domestic product. "The tender was a big success and brought a very a nice price," said Excellence Nessuah analyst Micha Goldberg. Leader's Glazer headlined his note to investors with the word "WOW!!" Traders welcomed the results of the tender and Leumi shares closed up 1.9% at NIS 15.38. Seven groups took part in the bidding, with four being strategic investors looking to hold the stake for the long-term and three being financial investors looking to sell the stake quickly into the capital markets. This was the first time in Israel's history that the government pitted these two types of investor against each other in a privatization tender, Olmert said. The four strategic investors included one other foreign group and prominent Israeli businessmen Nochi Dankner and Lev Leviev, a spokesman for the two men said, while one of the financial investors was German banking giant Deutsche Bank, a source close to the situation revealed. The deal should close by the end of the month as the government has received all the necessary approvals to sell the 9.99% stake. Should Barnea take up the option to buy the additional 10.01%, it would need the permission of the Bank of Israel and other authorities to hold a controlling stake in Leumi. Shlomo Eliahu, who owns 10% of Bank Leumi and was its biggest private shareholder until now, is interested in joining his stake with that of Barnea, although he won't initiate any alliance. "I am not going to do anything, but if they contact me I am willing to join my stake with theirs," he said in a telephone interview. A report in the Hebrew press said Leviev, who owns Africa-Israel and has extensive diamond interests, wanted to join the Cerberus-Gabriel group, although a spokesman declined to comment on the speculation. In a press release, Leviev said he would decide on his next steps in the future. The tender process succeeded despite Leumi workers holding a nationwide strike on Sunday. Union chairman Louis Roth had warned that the employees would take any actions to protect "our livelihood and rights, including damaging the bank, its clients and its revenues." However, on Monday, the Treasury and the union reached a settlement that guaranteed the workers' collective agreement for the next five years. In addition, the employees would receive a bonus worth a month's salary and options to buy the bank's shares at a discount. The tender is one of the last stages of the privatization of Bank Leumi, whose shares the government started selling on the Tel Aviv Stock Exchange in 1993. In March of this year, the state sold a 6.5% holding to Deutsche Bank for NIS 1.16 billion, or NIS 12.64 a share, and in July it sold a 3.5% stake to US financial giant Citigroup for NIS 611m., or NIS 12.35 a share. Both banks immediately sold the shares. The privatization is also the last to take place in the sector after 22 years of government involvement following the banking crisis of 1983, when the state was forced to step in to save the banks from collapse. In January, the government sold a 26% stake in Israel Discount Bank to a consortium headed by US businessman Matthew Bronfman for NIS 1.3b., though the transaction still needs to receive final approval from US authorities. The group has an option to buy another 25% within three years of the sale at the same valuation.