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Beneath the surface, a major struggle is taking place over one of the biggest transactions ever conducted in Israel: the sale of Bank Leumi.

The story began in October 1983, when shares in Israel's big banks collapsed after a manipulation scandal. The state was forced to spend $7 billion to buy up bank shares to save them from meltdown, to save the economy.

Since that enforced nationalization, the process of selling the banks has been leisurely. First Union Bank was sold in 1993. Then Mizrahi Bank was sold in 1994, then Bank Hapoalim in 1997 and finally Israel Discount Bank, in 2005. Bank Leumi remained on the shelf.

At first, there was talk of selling the bank via the "options plan." In other words, its shares would be distributed to the general public free of charge. That was a very bad plan, because it would have caused the Finance Ministry to lose billions, and because the bank would have remained without a clear controlling shareholder. That would have meant that its managers would have unfettered power, which is not a good thing.
 
Then, former prime minister Ariel Sharon and former finance minister Ehud Olmert decided to retreat from the "options plan" and sell the bank through a tender. In November 2005, the tender took place, and was won by a group composed of two American hedge funds, Cerberus and Gabriel. The group promised to pay NIS 4.6 billion in return for a controlling stake of 20 percent of Bank Leumi - a very high price. But that was not the end of the story.

The sale process included two stages. The first was completed: The group paid NIS 2.5 billion for 10 percent of the bank. But the second stage (raising its stake to 20 percent by May) is now in serious doubt. In order to complete it, the group needs the approval of the Bank of Israel, which has not been forthcoming.

It turns out that there are certain powerful groups who do not want the bank to be sold.

They would like the winning group to give up and leave.

They are happy with the present situation, in which the managers control the bank, and there is no owner who checks, investigates and demands explanations.

These businesspeople are convinced that the present situation makes it easier for them to receive large amounts of credit.

The winning group did not expect red-carpet treatment; it expected that there would be difficulties. But it did not anticipate such a prolonged and punctilious examination by the Bank of Israel.

This is an established, respected consortium, among the largest in the world in the financial field. Many of its members are wealthy Jews. It has purchased a bank in Japan and a bank in Europe, and it intends to make Bank Leumi a major international player, to expand its activity to financing international transactions and to take it out of the provinces into the wide world.

But it fears that the Bank of Israel has been checking into it for such a long time in order to find an excuse to torpedo the transaction.

The Bank of Israel agrees that the examination is taking a long time, but it explains that there is a problem with Bank Leumi New York. According to American law, the group cannot own both a New York bank and nonfinancial enterprises. Therefore, it will either have to sell Leumi New York or turn it into a financial company.

But how is it possible to expand international activity without a bank in the United States? Is it possible for the number two bank in Israel not to have a bank in the U.S.?

The Bank of Israel is also afraid of the consortium's aggressive business activity: Central bank officials are asking what will happen if the group embarks on a risky operation that fails and leads to heavy losses. They are also worried by the fact that this is the first time that half of the investment will be coming from "other people's money" (the money of investors in the funds), while only half of it is the personal money of five or six wealthy Jews.

On the other hand, Bank of Israel officials say that they know these are high-quality investors, with tremendous capital and an excellent reputation, who can turn Bank Leumi into a global bank.

There is a big business opportunity here for the State of Israel, but soon it will be too late. It is true that there is a problem with Bank Leumi New York, but in every major transaction, there are problems. There is no such thing as an ideal transaction without obstacles. The Cerberus-Gabriel group should be allowed to complete the transaction. Both the banking system and the economy would benefit from its entry into Israel.