Bank Hapoalim No Longer Interested in Buying Discount’s New York Unit

Discount wants to sell all or part of the subsidiary to shore up its capital adequacy ratio and increase lending.

Bank Hapoalim said Wednesday it’s no longer considering buying Discount Bank’s New York subsidiary, less than a week after expressing an interest in the company.

Hapoalim’s statement to the Tel Aviv Stock Exchange reversed an announcement from December 5, when the bank said it was weighing a purchase of Discount Bancorp.

Hapoalim, Israel’s largest bank, declined to explain the turnaround, but market sources said last week the odds of a transaction were low because the outlay would force Hapoalim to halt dividend payments. That in turn would undermine the plans of Arison Group, Shari Arison’s investment vehicle and Hapoalim’s controlling shareholder, to reduce its leverage. 

Discount values the New York unit at $900 million, although the board would prefer to sell only a 30% stake. An acquisition of only a stake would create regulatory problems for Hapoalim by putting it in a partnership with Discount, a major competitor.

It could be that Hapoalim expressed an interest in Discount Bancorp to receive detailed information on a major competitor’s subsidiary. Or it simply might have decided the deal wasn’t worth it.

Discount wants to sell all or part of the unit to shore up its capital adequacy ratio so that the Bank of Israel will let it increase lending and boost interest income.

Ofer Vaknin