Shari, Take Our Shares, Please

The owners of Israel Salt Industries, the Dankner family, who until last week thought they'd soon be counting the $860 million from selling their shares to Nochi Dankner, suddenly found themselves in a much less pleasant waiting line.

After their senior partner at Bank Hapoalim, Shari Arison, torpedoed their deal with Nochi, they are now waiting to see what the Bank of Israel will have to say.

The Bank of Israel needs to examine the deal in which Arison bought out the 5.5% stake held by her American partners in the bank. "Salt Industries is waiting for the decision of the Bank of Israel, and thereafter it will have something to say", associates of the company said.

According to the associates, if the central bank rejects the deal, the situation would return to the status quo ante, and perhaps the possibility of selling the shares to Nochi Dankner would be reopened. Dankner has said in the past that he would not carry out the deal against Arison's wishes, but the sources say anything is possible in the dynamics of Israeli business. Still, the odds of this scenario seem slim.

A more likely scenario is that the central bank will conditionally approve the deal between Arison and her American partners. These conditions would neutralize the exclusive control of the bank that Arison would have thanks to the deal, and would afford the Salt Industries shares the status of controlling shareholder.

Currently, with Arison owning 85% of the core of control, and votes requiring a 75% majority, their controlling shares are meaningless. The sources recall that it was the Bank of Israel that had made a point of requiring agreement by several controlling shareholders by insisting on the 75% threshold.

There remains the possibility that the central bank could give unconditional approval to the deal. In this case, the Dankner family is liable to ask the central bank for permission to sell their controlling shares to Arison or to exchange them for unrestricted shares.

In the first case, they would immediately receive financial compensation. In the second case, they would receive unrestricted shares that they could sell or mortgage at any time at a later date.

Currently, they are not allowed to mortgage the controlling shares or to sell them without the approval of the central bank. The weakness in this scenario is that Arison wouldn't have any incentive to acquire their shares because either way she would enjoy full control of the bank once the recent deal is approved.

Another alternative facing the Dankner family depends on the supervisor of banks. Should he see fit to approve the Arison-American deal, the family could ask the Bank of Israel to improve the rights of the controlling shares in their hands.

For example, Arison could be obliged to receive their approval as a minority controller for central decisions within the bank. The central bank could even make a list of decisions that would require their approval, such as appointing a bank chairman or CEO. That would give the Dankner's controlling shares added value - as they do in any company without an exclusive controlling owner.

Because the Dankners are burdened with heavy personal debts to the banks, it seems they would prefer a scenario allowing them to leave the bank with cash in hand, to redeem their debts and to start anew.

Therefore, they expressly have an interest in the Bank of Israel approving the Arison deal through amending the voting agreement, such that the Dankners will be able to influence substantial decisions.

This situation would be, from their perspective, a weigh station before selling their shares to Arison or to a third party. For without having added value of control, Arison will lack any incentive to buy off their shares.