Central Bank Likely to Change Voting Accord as Arison Boosts Hapoalim Stake

Bank Hapoalim controlling shareholder Shari Arison has increased her hold on Israel's largest bank and ensured herself complete control of the decision-making process. Arison struck a deal with her American partners on Thursday night to buy 5.5 percent of the controlling shares, giving her 75 percent. The deal requires the approval of the Bank of Israel.

Arison will pay $170 million in cash, or 60 percent of the consideration in the deal. The other 40 percent will be paid in the form of non-controlling shares in Bank Hapoalim. The deal was signed according to the market value of the shares at the time of closing. The 30 million floating shares the foreigners received from Arison had a market value of $140 million at the time, bringing the deal to $310 million. The U.S. partners can sell the floating shares at any time to any buyer, in stark contrast to the controlling shares they sold to Arison in exchange. Controlling shares in a bank cannot be sold without permission from the central bank, subject to a stringent examination of financial stability and an in-depth review of the buyer.

The cash value of the controlling shares was set at NIS 18.25 per share. In contrast, Nochi Dankner had offered NIS 16.27 per share a week earlier. The Arison deal values the controlling shares at 5 percent below their market value, while Dankner had offered 20 percent below market.

Financial market sources believe central bank regulators will be forced to consider whether they are willing to allow a single shareholder to make all substantial decisions at the bank.

The Bank of Israel has determined in the past that decision-making requires a 75-percent majority of the controlling shares, which ensures at least one other shareholder on board with the major shareholders' vote. The central bank may now expand this condition to require that Arison's partner agree to major decisions.

The Dankner Group, through Salt Industries, holds 3 percent of the controlling shares and 3 percent of the floating shares in the bank, although these are not currently relevant to the voting agreement.

Hapoalim chair Shlomo Nehama had held talks in recent months to buy some of the Dankner controlling shares. However, the Bank of Israel said he would have to waive his chairmanship should he make the purchase.