Finance Min. Offering Foreign Investors a 8.3% Share of Discount Bank

The state issued a closed tender for 5% of Israel Discount Bank's shares to 10 foreign investment houses last night.

The parties have until 8 A.M. today to submit a bid. The winner will also receive an option to purchase another 3.3% of the bank's shares at a 0.5% discount off the price of the 5% bundle, by 6 P.M. today.

The state currently owns 25% of Discount Bank's equity shares, valued at NIS 2.25 million. It is seeking to raise about NIS 800 million from the current sale.

Accountant General Shuki Oren explained to Knesset members that a lump sale lets the state complete the process in a simple, straightforward manner, taking advantage of the stock's current high price while shielding the government from market fluctuations.

Oren added that the lump sale will let the government get the most out of the market. The timing and size of future lump sales will be decided by the Finance Minister based on market conditions, and reported to the Knesset Finance Committee.

At Oren's request, the Finance Committee approved the sale yesterday evening. The committee was convened for an urgent closed meeting before the close of trade yesterday. Fourteen voted in favor, three voted against and one abstained.

Committee members criticized the dramatic orchestration and the secretive meeting, which they say could have been done after trade ended, thus easing the tension. Former finance minister Roni Bar-On, who is not a committee member, rushed to the meeting to hear what all the fuss was about. But he left just a few minutes after the meeting convened, calling the matter "much ado about nothing."

MK Shelly Yachimovich abstained in the vote. "The sale itself is reasonable since Discount is a privatized bank in any case, but the manner that the Finance Ministry chose to obtain the committee's approval is scandalous and an unnecessary shock to the stock exchange and the dollar. Nothing would have happened if the sale had taken place gradually, and it more than likely would have been more worthwhile for the state," she said.

MK Haim Katz said that the urgent meeting sent the dollar up 1.2%. The advance notice, he said, sent the stock exchange from flat into a decline, and Discount Bank shares fell 2.25% because of the dollar's increase. "This is no way to do business," Katz added, in response to committee chairman Moshe Gafni's argument that "there had been no choice but to hold a secret meeting close to the close of trade to ensure that the bank's shares remain high and the state profits."

Meretz chairman Haim Oron said that the drama over the sale of the Discount shares was overblown, and involved a technical matter. "The petition over the controlling share in Bank Leumi, on the other hand, requires a broad public debate. There is no reason, other than privatization at any cost, to sell the controlling share in one of Israel's two largest banks." he said.

During the meeting, MK Jacob Edery asked whether there was any connection between the sale and the fact that Joseph Bachar, the treasury's former director general, is scheduled to become the bank's chairman. Finance ministry representatives said there was not.