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Bank Hapoalim (TASE: POLI) blinked. Possibly embarrassed by the flight of capital under management from PKN in the four months since the bank agreed to sell the mutual funds management company to Amit Berger, it's giving him an NIS 100 million discount on the agreed-on price of NIS 954 million.

Since the sides shook hands, more than NIS 3 billion has vanished from PKN, mainly because of withdrawals.

Berger was the party with whom Bank Hapoalim struck the deal, but two weeks later his own Solomon group, through which he was to effect the transaction, was sold to Markstone. The pressure on Bank Hapoalim to lower the cost came from Markstone, the biggest private equity fund in Israel.

Nowhere in the agreement had Bank Hapoalim been required to give the buyers a discount in the event of capital flight from PKN.

Four months ago, PKN had NIS 20.5 billion assets and the price, NIS 954 million, was equivalent to 4.6% of its assets under management. Back then the market groused that the price was too high. After the flood of withdrawals in late 2005, the price tag looked higher than ever.

The discount is a triumph for Markstone, which in any case did not stand to lose substantial management fees from the withdrawals. Most of the redemptions were from mutual funds specializing in shekel vehicles, which hardly charge any management fees anyway. The funds investing abroad are the ones that charge high fees, and if anything they recruited money in the last four months, which improved PKN's revenue structure.

One reason for Bank Hapoalim to capitulate to Markstone is that the bank is still negotiating to sell its provident funds and training funds to it. Another reason had simply been image.

Neither Bank Hapoalim nor Markstone would comment for this report.