Shlomo Eliahu, Bank Leumi's largest shareholder, has scored a NIS 2.4 billion bridge loan from the bank in his quest to fund the NIS 4.2 billion acquisition of Migdal Insurance & Financial Holdings, sources have told TheMarker.
The 69% stake is currently owned by Italy's Assicurazioni Generali insurance group.
The loan is presumably just for the couple of years Eliahu needs to unload his 9.59% stake in Leumi and 27.1% stake in Union Bank of Israel. The loan marks the first landmark deal for Rakefet Russak-Aminoach as Leumi's CEO. Loans of this type commonly carry interest of 3% over government bonds of a similar duration.
Eliahu's Leumi and Union Bank stakes are currently worth just NIS 1.6 billion and NIS 261 million respectively, after having tumbled over the past year. So Eliahu would welcome a decision by the Bank of Israel allowing him to postpone sales until the shares recover.
As loan security, Eliahu will put up his new shares in Migdal in excess of those required for control. Liens on other assets owned by Shlomo Eliahu Holdings will probably be given as well.
The Finance Ministry is expected to hold a hearing at the end of the month on allowing Eliahu to acquire control of Migdal. The meeting will be chaired by the director of the ministry's capital market, insurance and savings department, Oded Sarig.
Similar deliberations will be held by the Justice Ministry to delve into factors such as Eliahu's purported penchant for gambling (legally ) at London casinos. In the end, the deal is expected to be approved.
Making the rounds
Although Eliahu has only closed a deal with Leumi so far, he has been making the rounds at other banks like Hapoalim and First International Bank of Israel. And while Leumi seems intent on going it alone, Eliahu is hoping for another few hundred million shekels in funding from the others against his Leumi shares, and maybe against his Union Bank shares, too.
Leumi's involvement with Eliahu and Migdal runs deep. As the bank's largest shareholder, Eliahu was instrumental in the appointments of Amos Sapir and Zipora Samet to its board. Leumi, which once owned 20% of Migdal, now holds 10%, while Migdal has a 4.7% stake in Leumi.
Eliahu and outgoing Leumi CEO Galia Maor also go way back. Two years ago Eliahu proposed Maor as his candidate to chair the bank, and rumors have been spreading that Maor is set to be Migdal chairwoman.
Leumi's board is preparing to meet shortly to approve the loan, which is being treated as a related-party transaction even though Eliahu had placed his shares with a trustee as part of the deal.
Meanwhile, negotiations are underway for the sale of Eliahu Insurance Company's life insurance portfolio to Psagot Investment House. Eliahu's acquisition of Migdal necessitates the sale of the portfolio, under industry regulations.
