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Bank Hapoalim plans a purchase offer on shares in Maritime Bank of Israel, hoping to merge it into its own operation.

Hapoalim CEO Eliezer Yones announced yesterday that in keeping with Bank of Israel's new policy of encouraging the merger of small and medium-sized banks into larger ones, Supervisor of Banks Yitzhak Tal asked Hapoalim to consider a Maritime buyout.

Hapoalim had sought to acquire Maritime Bank about a year ago, but was rejected by the central bank, which argued the move would harm competition and increase concentration in the sector. Bank of Israel's policy changed after Trade Bank collapsed in the wake of a NIS 250 million embezzlement scandal and due to fears that other small banks could face liquidity crunches.

Bank of Israel Governor David Klein even expressed the view that smaller banks are riskier than large ones. The Hapoalim buyback offer for Maritime will be based on 72 percent of its equity according to pre-offer financials.

At the end of Q1 2002, Maritime Bank reported NIS 251 million in equity, meaning Hapoalim's offer will reflect a value of NIS 181 million. This is 57 percent above the small bank's market capitalization of NIS 115 million.

Maritime's controlling shareholder Michael Steinhardt, who holds a 37 percent stake among the controlling group at Hapoalim, announced he plans to respond to the purchase offer, which is contingent on a 95 percent shareholder response rate.

Bank Hapoalim stated that publication of the purchase offer is contingent on due diligence. If the results are satisfactory and do not indicate a deviation of greater than 8 percent in equity, material deterioration of financial results or Israeli economic downturn that could adversely affect the possibility of completing the transaction, then the purchase offer will be made.