The CEO of Italian insurance giant Generali, Giovanni Perissinotto, will arrive in Israel next week to hear the details of subsidiary Migdal Insurance's plans to acquire control of United Mizrahi Bank.
The Mizrahi management, headed by CEO Victor Medina, will make a presentation on the bank for Perissinotto, while Migdal chairman Aharon Fogel and CEO Izzy Cohen will present the planned deal and its advantages. Migdal is interested in taking over the Wertheim and Ofer families' holdings in Mizrahi Bank.
The two families currently hold 52 percent of the bank's capital shares. Migdal plans to finance the deal using the Bank Leumi shares it holds and cash. Migdal has a 9.5 percent stake in Leumi, of which 8 percent is a direct holding and 1.5 percent is part of the investment portfolio for profit-sharing policies. The direct holding is valued at NIS 620 million while the entire package is valued at NIS 740 million.
The market capitalization of 52 percent of Mizrahi is currently NIS 1.16 billion but a control premium must be added, raising the value of the share block. This means that Migdal will have to pay the Wertheim-Ofer group a few hundred million shekels in addition to its Leumi stake.
Fogel and Cohen are very interested in closing the deal and believe it will advance Migdal, allowing the insurance company to cooperate with Mizrahi subsidiary mortgage bank Tefahot. The Wertheim and Ofer families are interested in closing the deal because relations between them have deteriorated and they are interested in dissolving their partnership in the bank.
However, Generali is still undecided as the company specializes in insurance, not banking, and because Israel's security and economic situations do not encourage new investment.
In addition, in order to close the deal, Leumi must exit its 20 percent investment in Migdal because the supervisors of insurance and banks will not allow Migdal to take over Mizrahi while Leumi holds a substantial stake in Migdal's capital. The watchdogs fear increased centralization of the financial sector among just a few players.
Migdal is convinced that the best way to exit its poor investment in Bank Leumi is by transferring the shares to Wertheim and Ofer as part of the consideration in the Mizrahi deal. Migdal bought NIS 1 billion in Leumi shares in the past two years, which are now valued a just NIS 620 million. As a result of the gap between the investment's cost and its market cap, Migdal was forced to write off NIS 52 million on the depreciation.
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