Arison in Talks to Sell All or Part of Hapoalim Stake

Preliminary talks are with an unidentified U.S. investment fund.

Tomer Appelbaum

Shari Arison is in preliminary talks to sell half of her controlling 20.08% stake in Bank Hapoalim – and perhaps the entire holding – to an unidentified U.S. investment fund.

Neither the sale nor price have been finalized, nor has the Bank of Israel been informed that negotiations are under way. Arison Investments, Shari Arison’s investment vehicle, has also approached other possible investors for the shares, whose Tel Aviv Stock Exchange market value is about 5.1 billion shekels ($1.3 billion).

A spokeswoman for Arison Investments declined to comment directly on a possible sale. “Arison Investments, as an investment company receives, initiates and examines possible offers from time to time to bring new investors into Bank Hapoalim,” she said. “These offers are examined in accordance with the global operations of the company.”

A sale of all her stock would end 19 years of family control over Israel’s largest bank. Shari Arison father, Ted, an Israeli who made his fortune in the United States through Carnival Cruise Lines, bought control of Hapoalim with the Israeli Dankner family and a group of American investors. Shari Arison inherited her father’s shares and 10 years ago bought out her partners.

Arison Investments, whose holdings also include Housing & Construction Limited, owes about 3 billion shekels to banks and bondholders and in recent years has sought to reduce its leveraging. It has in the past sold about 400 million shekels of Hapoalim stock and about a year ago news reports said it had sought unsuccessfully to bring a partner into Hapoalim.

Hapoalim shares have fallen about 3% in the last 12 months and today have a market cap of about 25.4 billion shekels. On Sunday, the stock ended down 0.4% at 18.99 shekels.

Arison reportedly is seeking a control premium on the stock so that the sale could well exceed 5.1 billion. In addition, Hapoalim trades at a low 0.76 to its book value, especially given that in recent years it’s been generating a return on equity of 9-10%.

On the other hand, the bank faces a handful of challenges going forward, among them a U.S. investigation into allegations it helped American depositors evade taxes that is likely to land it with a penalty in the hundreds of millions of dollars. The Israeli government, meanwhile, is weighing proposals for Hapolaim and its biggest rival, Bank Leumi, to divest their profitable credit card subsidiaries.

In addition, tighter regulations have constrained the power of bank controlling shareholders and the dividends the banks pay have fallen in order to meet capital adequacy standards.