Government sells 5% stake in Discount Bank to UBS

The government sold a 5% stake in Israel Discount Bank to UBS on Tuesday, lowering its holding in the country's third-largest bank to 15%, the Finance Ministry said.

The ministry did not provide details of the deal, other than UBS was one of four foreign investment banks to submit bids.

A source close to the deal told Reuters that the Swiss bank bought the Discount shares at NIS 6.803 (about $1.76) each – a discount of nearly 2% from Monday's closing price of NIS 6.93 (about $1.8) – for a total of NIS 340 million (about $88 million).

The source noted that UBS then sold the Discount shares to its clients, mostly foreign ones.

UBS has an option to buy as much as another 3.33% of Discount by 3 pm GMT. The source said exercising the option depended on whether UBS clients wanted more shares.

"The 5% was sold in less than an hour," the source said. "UBS will probably buy the 3.33% more. Demand is very high for Discount."

Shares of Discount were down 1.23% at NIS 6.85 (about $1.78) at midday.

Late on Tuesday, the Finance Ministry approached nine foreign investment banks and asked them to submit bids to buy a 5% stake in Discount.

It said the decision to sell the shares came after recent interest by foreign investors.

In similar fashion, the government sold 5% of Discount through Deutsche Bank in January for NIS 435 million (about $112 million) – or NIS 8.871 (about $2.3) a share. At the time, Deutsche declined to exercise an option for 3.33% more.

The Bronfman-Schron group, led by US businessman Matthew Bronfman controls Discount with a 26% stake.

The government has long said it seeks to rid its stakes in Discount and in Bank Leumi, Israel's largest bank in which the state is the controlling shareholder.

A Finance Ministry spokesman said the ministry had no concrete plans to sell the remaining stake in Discount.

"After we close the deal we will consider the next step," he said, noting that as part of the agreement with UBS, the state cannot sell any more of the bank for three months.

He added that a sale can be made via the stock exchange, to foreign banks or directly to a strategic investor depending on demand and market conditions.

"Everything is possible and nothing has been decided yet," he said.

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