The surprise was complete. On Monday Bank Leumi shares rose 2.2 percent in trading, but none of the investors had a clue as to what was really happening. Yesterday morning the state of Israel sold 6.5 percent of the bank for NIS 1.162 billion - reflecting a price of NIS 12.64 per share - 1.5 percent lower than Monday's closing price.

But the state was also in for a surprise itself. It may have been confident that it sold 10 percent of Leumi, but in fact Deutsche Bank, which won the tender, decided against exercising its option to increase its 6.5 percent stake by another 3.5 percent.

The lightning deal closed yesterday morning, and Deutsche Bank had until 6 P.M. to decide whether to exercise its option. Although it managed to place all the stock, 90 percent with foreign investors and 10 percent with Israeli investors, at a profit, buying it at NIS 12.58 and selling it at NIS 12.64, it decided not to buy any more. The investors buying from Deutsche received 70 percent of their orders.

The German bank bought 92 million shares for NIS 1.162 billion, but passed up the right to buy another 49.5 million shares, hence the state still owns about 29.5 percent. The state committed itself not to sell any more Leumi shares for the next 90 days as part of the offer. The state also received another NIS 340 million yesterday - its share of the billion shekel dividend announced by Leumi last November, and paid out yesterday.

Late yesterday afternoon, Finance Minister Benjamin Netanyahu announced that the treasury was considering how to proceed with the bank's privatization. It might pursue the plan, which received the cabinet's blessing in February, to distribute stock options among the public for free, or it might decide to sell blocks of Bank Leumi stock on the market.

Given the intense demand for the stock, the state may decide to sell its shares to foreign investors and be done with it.

End of options?

Some believe that will be the case. "This is the end of the options plan," stated a top treasury official early yesterday. "It is now clear that if the treasury people do their jobs properly, there will be no problem selling Bank Leumi to investors, at a good price and quickly, too."

In any case, the official added, the options plan had been too clumsy, too complex and gratuitous. The treasury acted wisely in not sticking blindly to its preconceptions and taking advantage of market conditions.

Some capital market sources complained yesterday that the lightning selloff was carried out too hastily, for motives that remain unclear. It was handled so covertly and oddly that Michal Abadi-Boyanjo, the chairwoman of the state's privatization agency MI Holdings, was left in the dark and quit in umbrage yesterday before being coaxed to stay on for the time being (see box).

Rather, the treasury's accountant general, Yaron Zelekha, designed the lightning sale of the shares in Leumi yesterday. Abadi-Boyanjo was informed of the covert move only at 4 P.M. yesterday, well after the Knesset Finance Committee had approved it. Zelekha called 11 international investment banks after the Tel Aviv Stock Exchange had closed for the day on Monday, and secured the sale.

Presumably the treasury will be using its compensation from the Deutsche Bank deal to help pay for Prime Minister Ariel Sharon' disengagement plan. Various estimates say implementing the plan, including compensation and the cost of military redeployment, may cost as much as NIS 7 billion, whereas the 2005 budget factors in only NIS 2.2 billion.

The treasury is pleased as punch with its nimble move. "It was no surprise, really," summed up a person involved in the affair. "The state did much the same when selling its stock in Bank Hapoalim and Bezeq."

Like thieves in the night

Bank Leumi workers lost no time reacting to the state's lightning sale of a 10 percent stake of the bank to Deutsche Bank yesterday morning. Leumi's labor committee promptly declared a labor dispute as 10 percent of the bank's equity passed from government to private hands.

"The state's sale of Bank Leumi shares to the German Deutsche Bank is a night raid," workers' committee head Louis Roth said. "It's an attempt to steal the bank from under the noses of the workers, without talking to them and without discussing their rights with them," he said.

The significance of yesterday's announcement is that after a two-week "cooling off" period, the bank's 8,000 workers can declare a full-blown strike.

Head of the Histadrut labor federation's banking division, Zion Shema, sent a letter to Industry and Trade Ministry's labor relations officer yesterday morning in which he noted two grounds for the labor dispute: the sale of the 10 percent stake without consulting labor representatives or providing prior notice, and the failure to assure workers' rights in a written agreement subsequent to the sale.

The labor representatives denounced the behavior of the Finance Ministry and Knesset Finance Committee, which approved the transaction, accusing the two of behaving like "thieves in the night." Leumi workers will commence a battle to safeguard their rights and obtain "appropriate compensation," Roth said, adding that it would be no less than what the state promised Israel Discount Bank workers when it sold controlling stake of the bank earlier this year.

"Two weeks ago, the accountant general promised to distribute bank shares to the public and to make Israeli citizens rich," Roth said. "Suddenly, he does an about-face, and sells the bank's shares to a foreign investor, and there's talk that the entire bank will be privatized in such a way. And everything is done without exchanging a word with us."

A treasury spokesman responded: "The treasury's accountant general, Yaron Zelekha, made it clear that all bank workers' rights would be preserved, and they would receive benefits as is befitting the privatization of state banks and companies. The procedure of selling Leumi does not contradict any existing agreements between workers, bank management, and the Finance Ministry regarding workers' rights and privatization."