Battle for Control of Hapoalim Heating Up

Relations among the controlling shareholders of Bank Hapoalim are getting ever more complicated: Yesterday, the American partners, who own 5.5 percent of the bank, told Israel Salt Industries, which is controlled by the Dankner family, that the company could partner with Shari Arison, the bank's main controlling shareholder, in purchasing the Americans' stake in Hapoalim.

But Israel Salt informed the Tel Aviv Stock Exchange that it had received an offer to exercise a right of first refusal over the shares held by the U.S. investors - as opposed to merely a right to join in the purchase. It added that it is currently examining whether the offer conformed to the shareholders' agreement, and has requested clarifications from the potential sellers.

Sources close to the deal said yesterday that the Americans deny having offered Israel Salt first refusal. The disagreement is apparently over whether Israel Salt can demand a right of first refusal even though the American only offered it the right to participate in the purchase.

The controlling stake of Bank Hapoalim comprises 20 percent of the bank's shares, divided among Arison (11.5 percent, or 57.5 percent of the controlling stake), American investors Len Abramson, the Schusterman family and Michael Steinhardt (5.5 percent combined) and Israel Salt Industries (3 percent).

Arison recently signed an agreement to purchase the American partners' 5.5 percent stake, which would increase her stake in the bank to 17 percent. This deal followed her exercise early last week of her right of first refusal in order to block the sale of the Americans' shares to Nochi Dankner. She did not veto Dankner's purchase of the Hapoalim shares held by other members of his family (the 3 percent stake held by Salt Industries), but since Dankner conditioned that transaction on his being able to purchase the Americans' 5.5 percent stake as well, this deal was called off.

According to the voting agreements among Hapoalim's controlling shareholders, significant decisions require a 75 percent majority of the controlling shareholders. If Arison's deal with the Americans goes through (it must still be approved by the Bank of Israel), she would increase her share in the controlling interest from 57.5 percent to 85 percent, making her the bank's sole decision-maker: Israel Salt's 3 percent stake would no longer have the power to affect shareholder decisions. It would therefore become a burden to the Dankners instead of an asset, since they would be unable to use or sell the shares without Bank of Israel approval.

And even if Israel Salt joined in the purchase, Arison's stake would still rise to about 80 percent of the controlling interest, meaning that her control would still be absolute.

The sources said that in line with a founders' agreement among the controlling shareholders, the Americans informed Israel Salt that they were offering the company the right to join in the purchase, proportionally to its stake in the controlling interest.