Dankners Negotiating Sale of Hapoalim Stake to Arison Firm

Nochi Dankner and his family are negotiating the sale of their holdings in Bank Hapoalim to Arison Investments.

The objective of the deal is to allow Nochi Dankner to meet the requirements of the Finance Ministry's supervisor of banks, who is demanding that Dankner sell off his shares in Hapoalim as a prerequisite for approving his acquisition of the controlling stake in the IDB Holding Corporation.

The supervisor's demand stems from the fact that IDB is one of Hapoalim's largest borrowers, and the Bank of Israel fears that increasing the debts of Hapoalim's controlling shareholders will undermine the stability of the bank.

Nochi Dankner and his family (his parents, Yitzhak and Zehava, and his sister, Shelly) currently hold 17.5 percent of Israel Salt Industries, which owns an 11.6 percent stake in Hapoalim. The Dankners, therefore, have a 2 percent share in the bank's share capital.

At this stage, this 2 percent is preventing Dankner from getting the supervisor of bank's approval for the IDB deal.

The current market value of 2 percent of Hapoalim's share capital is NIS 181 million. On the other hand, the market value of Dankner's share in Salt Industries comes to only NIS 85 million.

The price at which the deal will go through remains unclear. Also an unknown is whether the assessment Salt Industries recently received from Prof. Amir Barnea, who valued the bank at NIS 16-17 billion, will constitute a basis for the deal.

Some two months ago, Nochi Dankner came to an agreement with his family that they would purchase his shares in Salt Industries in the framework of the restructuring of the family's businesses through the Ellern company. The households of Avraham and Shmuel Dankner, together with the sisters, Rachel Ellern and Orly Mor, are planning to purchase control of the three Dankner family enterprises - Salt Industries, Dankner Investments and Dor Chemicals - for $215 million.

Nochi Dankner's family will see a cut of this, as it holds 17.5 percent of the share capital of Salt Industries.

If the deal with Arison Investments goes through, Nochi Dankner rids himself of his stake in Hapoalim and receives approval for the IDB acquisition from the supervisor of banks.

The Ellern deal, however, has run into difficulties arising both from family disputes and the demand of Bank Leumi for additional guarantees as a condition for putting up the credit for the deal.

Assessments have it that Nochi Dankner is aware of the the possibility that the Ellern deal will fall through, and he is, therefore, conducting talks with the leading partner in Hapoalim's controlling nucleus, Arison Investments, which holds 20.7 percent of the bank's share capital.

Arison Investments, controlled by Sherry Arison and managed by Shlomo Nehama (the chairman of Hapoalim), has no interest in purchasing Nochi Dankner's share in Salt Industries, so the parties are expected to try to construct a deal in whose framework Salt Industries will sell Nochi Dankner's proportional stake in Hapoalim to Arison Investments.

The format of the deal will be determined in accordance with the Dankner family's tax considerations and internal agreements.

The supervisor of banks is entitled to require Arison Investments to purchase a portion of Salt Industries' stake in Hapoalim in the event of a further deterioration in the financial condition of Salt Industries.

Till now, the supervisor of banks has not demanded implementation of this clause in the approval granted to the group for the purchase of the controling share in the bank.

In the framework of its acquisition of Nochi Dankner's share in Hapoalim, Arison Investments may purchase an additional stake in the bank from the other Dankners so as to help them improve their liquidity.

Both the spokesman for Arison Investments and for Nochi Dankner's Ganden Group refused to comment on this report.