Road 6

Leumi hopes to sell the 9.7% stake in Derech Eretz at a company value of NIS 4 billion.

Bank Leumi (TASE: LUMI) is putting its investment in Derech Eretz Highways Management Corp. Ltd. up for sale. Leumi Partners Ltd., Bank Leumi’s investment branch, is in talks to sell its 9.7% holding in Derech Eretz, the Road 6 (Trans-Israel Highway toll road) franchisee to The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5). It’s possible other financial institutions will join the deal as well.

The talks between the parties, which are still in preliminary stages, are at a company value of NIS 4 billion, similar to the value at which the last Derech Eretz deal took place, when the Israel Infrastructure Fund (IIF) sold its holding to Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS). It seems that the high value of this deal spurred Bank Leumi to seek buyers for its shares.
If this deal does go ahead, Bank Leumi will receive NIS 390 million for its shares. The bank invested in Derech Eretz in two stages, the first of which was five years ago. The bank invested NIS 270 million, and stands to make a decent return of more than 40% on its investment, and a pre-tax capital gain of more than NIS 100 million.

Bank Leumi has plans to realize a few more holdings, foremost among them being Israel Corporation (TASE: ILCO), and Israel Corp. spin-off Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI). Bank Leumi also made two new investments in the past year: one in the company that owns Cinema City, and another in nylon-fiber manufacturer Nilit.

Published by Globes [online], Israel business news – – on May 27, 2015