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The Generali company of Italy has recently renewed talks over the acquisition of Mizrahi Bank. It appears that Generali is negotiating over the purchase of the Ofer Brothers Group's stake in the bank. It is still unclear whether the move will be made directly by Generali, or in conjunction with Migdal Insurance, which it controls.

The negotiations were renewed on the backdrop of preparations by the Ofer Brothers Group to split up the holdings of brothers Sami and Yuli between their sons so as to avoid inheritance struggles in the family in the future. Sources have reported that the cousins are at odds over the question of who will receive the group's holdings in Mizrahi Bank. The group's shares are equally held by Yuli and Sami Ofer.

A spokesman for the Ofer Brothers Group said in response to the reports that the group sees its investment in the bank as a very important strategic investment. According to the spokesman, the group has faith in the way in which the bank is managed and has no intentions of selling of its stake.

Toward the end of 2001, Migdal Insurance held talks with the Ofers about the possibility of acquiring control of the bank. The talks at the time were held with the knowledge of the Wertheim family, which is a partner in the controling nucleus of Mizrahi Bank, but bore no fruit.

According to assessments, Generali then decided to freeze the contacts due to the local and global recession. Sources close to the talks said that "the talks were never stopped, but they are being conducted on a low flame."

A few months ago, Migdal received a go-ahead in principle from Antitrust Commissioner Dror Strum to become a part of the controling nucleus in Mizrahi Bank. Strum's consent was required after a similar request regarding Migdal's participation in the controling nucleus of Bank Leumi was rejected. Generali holds 64 percent stake of Migdal's capital, while Leumi holds a further 20 percent. Migdal, for its part, hold 9.5 percent of Leumi's share capital. Migdal is Israel's largest insurance company, while Leumi is the country's second-largest bank.

The supervisor of insurance at the treasury, Eyal Ben-Chelouche, recently voiced his opposition in principle to moves that come to increase centralization in the insurance and banking systems. Hence, if the talks being held by Generali and Migdal on the purchase of Mizrahi Bank go well, Migdal is likely to be required to sell its holdings in Bank Leumi.

At the same time, Leumi could be required to reduce its influence in Migdal and, in any event, not to be involved in the company's decision-making processes pertaining to Mizrahi Bank.

Mizrahi is controlled by the Wertheim-Ofer Group, which purchased the bank from the state in 1995. Mizrahi, considered the fourth largest bank in Israel, recorded the best performance out of the large banks in the past year. Mizrahi controls Israel's largest mortgage bank, Tefahot, and this makes the purchase of Mizrahi particularly appealing to Migdal, in light of the synergy between insurance and mortgage activities.