A draft bill for distributing Bank Leumi shares to the public
was sent to the ministerial legislative committee earlier
this week. The total value of all shares proposed to be given
out is NIS 4.3 billion ($1 billion).
Bank Leumi was taken over by the government in 1983, along
with four other banks, when the government had to intervene
to prevent chaos after a multi-year scheme on the part of the
banks to support pump up their shares collapsed. Bank shares
had risen 300 percent over several years. Three of the banks
(HaPoalim, Mizrachi and Igud) were sold several years ago.
Bank Discount was also part of the arrangement and was sold
earlier this year. Leumi has not yet been sold, and is the
last remaining bank to privatize.
The bill explains that it is designed to provide the
government with another path to privatization for government-
owned companies. The more conventional approach to
privatization of a government-owned company involves the sale
of a controlling interest to a single buyer, or selling
shares on the Tel Aviv Stock Exchange. The new approach will
simply give out the shares owned by the state to the
country's citizens and residents, at no cost to them.
Under the bill, each eligible person will receive NIS 900
worth of shares. The budget cost to carry out the plan will
be NIS 180 million.
The main advantages cited for the proposed method are the
speeding up of the privatization, especially for a large
company such as the bank in which few potential buyers have
an interest or financial means to acquire the controlling
interest. Also giving out the shares is seen as a form of
distributive justice, returning to the public some of the
value it invested. It is also intended to reduce
centralization in the economy and to improve the capital
market by adding large and stable companies to those traded
on the Tel Aviv Stock Exchange (TASE). It is also hoped that
this method will increase public participation in the capital
market.
The bill proposes to distribute the shares in a number of
stages over several months' time. The right to receive
additional share packages will be as a "reward" for holding
onto the shares in the original account until the
distribution date of the next share package.
In order to ensure that the potential benefits of the shares
go to the people themselves and are not transferred to
speculators who take advantage, and to prevent deals designed
to bypass the regulations making eligibility contingent on a
minimum holding period, eligibility for additional packets
will also be dependent on there being no transactions in the
original shares account.
Every Israeli citizen over the age of 18 will be eligible.
The shares will be distributed directly to people's bank
accounts. The Ministry of Finance accountant general will be
responsible for managing and running the plan.
The share rights will not need a prospectus. The original
rights to the shares will be exempt from taxes and National
Insurance Institute levies, but later gains from the sale of
share rights after the rights have been used will be liable
to tax in accordance with the normal capital gains taxes.
