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The Finance Ministry called last week's issue of Bank Leumi warrants a success, but it became evident yesterday that only two foreign investors submitted bids in the tender and only one of those received an order.

The second investor submitted too low a bid and was not allocated any options. The minuscule participation by foreign investors raised criticism in the financial sector, particularly of the decision to make a roadshow abroad.

The state sold 6 percent of its Bank Leumi stake and will pocket NIS 310 million. Treasury officials expressed satisfaction with the results of the issue, which closed 15 percent above its minimum price and 6.5 times oversubscribed. In retrospect, it is now clear that almost all the options were purchased by Israelis, and only a tiny portion was sold to foreigners.

Financial critics believe this indicates a failure given the intensive marketing effort abroad. Last week the Bank Leumi management, including chairman Eitan Raff and CEO Galia Maor, as well as MI Holdings director general Yitzhak Klein made presentations on the bank and the structure of the issue to eight investment banks in London and Geneva. Representatives of the investment banks distributing the issue, Lehman Brothers and HSBC, also participated in the roadshow.

Financial sources said, "the bank raised interest among investors despite the negative sentiment toward Israel and the security situation, elections and the Iraq conflict." According to them, "investors expressed interest and were enthusiastic about the bank's strategy and management's operational plans."

Nonetheless, a summary of the issue indicates that virtually no foreign investors participated, causing great disappointment both at the bank and the treasury. A source involved in preparing the roadshow said, "there were always doubts regarding the necessity of the effort abroad as it was clear the issue would interest Israeli investors."

He said: "There was early criticism of the planned roadshow. It was clear the timing was poor as we have a lame duck government, before elections, and there are fears of war in Iraq. The roadshow was superfluous but the act of meeting with the foreign investment banks created positive reverberations toward the bank and the Israeli economy."

Another financial source claimed yesterday that the real aim of the roadshow was to "convince foreign investors not to sell their existing holdings in Bank Leumi due to the economic and security situations in Israel."

The demand to hold the roadshow abroad came from MI Holdins and Klein. The three investment banks leading the issue disagreed on the necessity of the roadshow even before it was held, due to the situation here. They feared that few financial institutions would participate in the roadshow and fewer bids would be received. The fears proved grounded as only eight banks met the roadshow team, compared to dozens of interest potential buyers in previous offerings of Israeli bank shares followed by many foreign bidders.

Klein stated in response: "Foreign participation in the issue was according to the sales model in previous offerings. There have been no offerings in recent years so there was great importance to re-involving foreign investors in the process.

"The leading investment banks gave prior commitment to buying the entire institutional tender amount and the issue was presented to institutional investors in England and Switzerland. In the end it became clear that a number of investors did seek to participate in the auction and some did receive allocations. We see the importance of exposing the bank to foreign investors also in the context of future offerings in the Bank Leumi privatization process."