Israeli-American billionaire Shari Arison is on her way out as controlling shareholder of Israel's largest bank.
The Bank of Israel said Tuesday that Arison's control permit will be canceled at the end of the year, after 21 years, and replaced by a holding permit.
Arison will have to sell her shares within five years and bank directors loyal to her will resign immediately. This includes Arison Investments CEO Efrat Peled, considered the most influential director on Bank Hapoalim's board, Ido Stern and Meir Wietchner.
Arison had requested to sell the shares after she was unable to find a buyer for the bank. Once the new arrangement goes into effect, Bank Hapoalim will become a bank without a controlling core, similar to Israel's other two large banks – Leumi and Discount.
Arison's investment company is the subject of a corruption investigation, and she has been questioned by police as part of the probe.
Arison Investments will have one year to sell its 20% stake in Bank Hapoalim and four years from the start date to complete the process.
The current value of Arison Investments' stake is the bank amounts to 7 billion shekels, or just under $2 billion.
The extended period of time that has been allowed for the sale seeks to reduce pressure on the bank's share price, which tumbled by 3.24% on Tuesday.
In a statement released on Tuesday, Arison Investments stressed there was no connection between the Bank of Israel's decision to allow the sale and the corruption investigation waged against Israel's largest construction firm, Shikun & Binui Shikun, in which Arison and has been questioned.
Arison released a statement saying, "Over the past few years I have tried to bring in a strategic partner and reduce my holding in Bank Hapoalim. Since no investor was found for an investment of this size, and after talks with the North American investors ended a few months ago, I approached the Bank of Israel with a request that it should examine the possibility of a permit to sell the holding on the open market.
"I have had the privilege of being the controlling shareholder in Bank Hapoalim for the past 21 years. I believe in Bank Hapoalim and wish to thank the board of directors, the management, the workers past and present, and the bank's loyal customers. I am sure that Bank Hapoalim, one of the pillars of the Israeli economy, will continue to operate with a vision of financial freedom, to grow, and serve all its customers faithfully."
A statement by the Bank of Israel confirmed the terms extended to Arison for the sale, saying that its "Banking Supervision Department focused on arranging the framework for dispersion of the controlling core.
"To prevent any concern of conflict of interest, the terms of the bank's directors, who are connected with the Arison group, will end immediately. The Chairman of the Board will continue to serve in his role after the said change in ownership, pursuant to the decision of the Supervisor of Banks, as other than having been appointed by the Arison family, he is not an officeholder in the group owned by her, nor connected to her in any other way."
The central bank stressed that "after the holding permit goes into effect, Bank Hapoalim will become a bank without a controlling core, whose shares are fully held by the public, directly or through the institutional investors managing the public's investments and long-term savings, similar to Bank Leumi, Discount Bank, and recently Dexia Bank as well.
"It should be noted the Bank of Israel does not necessarily see an advantage to a specific ownership model – controlling core or dispersed holding –and aligns the supervisory point of emphasis with the ownership model formulated at each bank."
Israeli financial daily Globes quoted a letter by Bank Hapoalim CEO Arik Pinto to the bank's employees, saying, "The upshot is that within the next few years the bank will become publicly owned, without a controlling core. As far as the day to day management of the bank is concerned, there is no change in the way it is run.
"We shall continue functioning as usual, with the current management team. The announcement ends a close and fruitful partnership between Arison Investments and the bank, during which the bank prospered and maintained its status as Israel's leading financial institution."
