Shari Arison is considering bringing a new investor into Bank Hapoalim (TASE: POLI). Sources inform "Globes" that the Arison group is considering the recruitment of a new partner in the controlling interest in Israel's largest bank. As far as is known, as of now, there are no concrete contacts with any specific investor, but the group has decided to seriously consider offers in the matter.
Arison currently owns 20.2% of Bank Hapoalim's shares through Arison Holdings, with a market value of NIS 5.66 billion. Market sentiment towards the Bank Hapoalim share is positive. The share has climbed 16% since the beginning of the year, so the share price is attractive for such a sale. The Arison group has sold free shares in the bank (that are not part of the controlling interest) for over NIS 400 million. If more shares are sold, it means there will be another partner in the controlling interest.
Arison Group spokesperson Michal Gurevich said in response, "As an investment company, Arison Investments receives offers, and from time to time considers inquiries and possibilities of bring new investors into Bank Hapoalim, out of a wish to continue developing and expanding the bank's business, with a special emphasis on development and expansion of its international business. These queries are considered individually, according to the company's global business strategy."
It is believed that the group is seeking to bring in a foreign investor in order to advance the bank's international business. At the same time, a senior capital market source said that if a suitable offer is received, Arison will not rule out the sale of the entire controlling interest. A sale of the bank will not be a simple matter, however. Arison can sell the controlling interest and receiving premium for it, or sell the shares on the market, as the Bronfman-Schron group did with Israel Discount Bank (TASE: DSCT), thereby dispersing the controlling interest and waiving the control premium.
Arison will not like giving up the control premium, but finding a buyer for the bank is a difficult task, since there is no longer any advantage in controlling the bank. The reason is that dividends from the bank have fallen dramatically as a result of regulatory restrictions, and the ability of the bank's controlling shareholder to influence the bank is now very limited - again, due to regulatory restrictions. In recent years, the Arison group has taken a series of measures aimed at reducing its leverage. Among other things, it has refinanced NIS 2.5 billion in debt, including extending the repayment period, and has sold off assets, headed by the sale of free shares in Bank Hapoalim. The Arison group is also emphasizing expansion of the group's international business. The group, managed by Efrat Peled, and which includes Shikun & Binui Holdings Ltd. (TASE: SKBN), among other things, has been stressing the overseas business of the companies it holds, and is currently active in over 40 countries. Bank Hapoalim is also looking to expand overseas; as Israel's largest bank, its potential growth in Israeli is limited.
Furthermore, Minister of Finance Moshe Kahlon is seeking to enhance competition with the banks, and has established a committee headed by Dror Strum to deal with this issue. The bank therefore realizes that it must find other growth engines to compensate for the expected drop in its revenue in Israel. Bank Hapoalim, managed by CEO Zion Keinan, is considering the acquisition of an overseas bank. The two main possibilities are the acquisition of a bank active in business credit in the US and a bank active in private banking in Europe. At the same time, it appears that up until now, no deal that has been considered has resulted in substantial negotiations. In addition, the investigation into the bank's assistance to US customers in tax evasion also makes such overseas expansion more difficult.
The Arison group's holding in Bank Hapoalim is of many years standing. Shari Arison's father, the late Ted Arison, acquired control of the bank 18 years ago from the state, together with a group of US investors and the Dankner family, which acquires its shares through Israel Salt Industries. After Ted Arison died, Shari Arison inherited his stake in the bank. Nine years ago, she began acquiring the shares of her partners. Now, nearly a decade since becoming the bank's sole controlling shareholder, she is considering taking a new partner in the controlling interest.
Published by Globes [online], Israel business news - www.globes-online.com - on July 19, 2015
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