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Migdal Insurance is about to sign an agreement selling 50 percent of Migdal Capital Markets to Bear Stearns. The transaction will apparently value Migdal Capital Markets at about NIS 100 million.

The agreement signals that Migdal is not sitting around waiting for the Bachar team to publish its recommendations about capital market reform. The insurance giant is preparing the groundwork for the banks' anticipated, and forced, sale of their provident and mutual funds holdings, worth an estimated $270 billion.

Migdal is the first company to ally itself with a foreign strategic partner. Bear Stearns is the sixth largest investment bank in the United States and is known both as an aggressive securities trader and a market maker. Migdal's alliance with Bear Stearns would arguably give it an edge when competing over the funds.

The partnership would also make Migdal Capital Markets a leading player ahead of the government's plan to impose tax parity starting January 2005, when both foreign and domestic capital gains will be taxed at the same rate.

Migdal Capital Markets provides portfolio management and trading services, investment advice and underwriting services. It also engages in management of provident and mutual funds, and is considered one of the biggest mutual fund managers outside the banking system.

Migdal Capital Markets acquired the Central Securities Corporation from Kardan for NIS 88 million in 2001. Migdal Capital Markets repurchased all the public's shares the following year in Central Securities and delisted it. The acquisition not only broadened the company's securities operations but gave it a seat on the Tel Aviv Stock Exchange.

A few months back Migdal also bought the Alumim money management firm from Kibbutz Alumim, which has NIS 1.2 billion assets under management. It will be formally announcing that deal within a few days.

Bear Stearns has been active in Israel before. It used to own a third of the shares in the Jerusalem Economic Corporation but sold them three years ago.