Discount Staff to Get NIS 250m in Bank Privatization Deal

Finance Minister Benjamin Netanyahu officially signed over controlling ownership of Israel Discount Bank to Matthew Bronfman's consortium in an official ceremony Tuesday, just hours after workers settled their protracted labor dispute. According to an agreement between workers and the state, Discount's 6,700 employees will receive bonuses collectively valued at NIS 250 million.

The buyers will pay the state NIS 1.3 billion for a 26 percent stake in the bank. Transfer of ownership requires regulatory approval that should take a few months.

"The price received for Discount is a fair one," Netanyahu said. Defending the sale at a price some NIS 280 million below its market cap, he added: "Treasury representatives faced hard-nosed buyers, but we were no less tough."

Even tougher, though, were recent negotiations with Discount workers. The Finance Ministry, MI Holdings, the government company handling Discount's privatization, and the Discount workers' committee leaders, signed the deal settling their months-long dispute just Tuesday morning, paving the way for the official signing.

Prior to the agreement, Discount's workers had imposed sanctions and full-blown strikes, protesting their lack of job security following the bank's privatization. The parties agreed that workers at Discount and its subsidiary, Mercantile Discount, would receive NIS 250 million, equivalent to four to five monthly salaries, in two installments. Bonuses will be limited to NIS 125,000 per worker. In exchange, the workers will forgo their demand to buy 10 percent of the bank's shares at a discount and borrow money from the bank under favorable terms to finance the acquisition. Nor would they object to the sale of the state's remaining shares in Discount.

With the end of the labor dispute, workers agreed not to strike or disrupt work for the next eight months, through September 30. They also agreed that the labor constitution governing the bank's workers would remain in force for five years.

In parallel, Discount will not be able to sell any assets over five years.

Regarding Israel Discount Bank of New York, the most profitable facility in the Discount group, if the new owners decide to sell it, they will need the workers' acquiescence first.

Chairman of Discount's labor committee, Riki Bachar, said he was glad about the bank's privatization. "I met with the buyers. They seem to be fair people who will act for the benefit of the bank and its workers," he said.

Commenting for the first time on the sale, Bronfman said: "For us, the deal to purchase Discount Bank is a vote of confidence in the Israeli economy, in the future of the region, and in the economic policy Finance Minister Netanyahu is pursuing." Bronfman said how he had been checking out investments in Israel for three years, with his first target being Discount. "We approached the state about this, but at that time the process stalled, and it was impossible to properly carry out a sale."

Bronfman's successful acquistion of Blue Square Israel two years ago encouraged him and his family to intensify efforts to purchase the bank, according to Discount's new controlling owner.

"We see in the Discount group, in light of its operations in Israel and across the globe, an investment that can serve as a bridge to the Israeli economy on one side, and as a connection between the bank and investors abroad on the other," he said.

Netanyahu amused the audience with a reference to Bronfman's recent wedding. "I have had the opportunity to sell a bank, and I have had the opportunity to disturb people during their honeymoon. But, this is the first time that I have disturbed someone's honeymoon to sell him a bank."

Netanyahu, who privatized Bank Hapoalim when he sold it to the Arison family in 1997, committed himself Tuesday to privatize Bank Leumi by November 2005, although he asked not to be called on it if it should take another month or two.