The Israel Antitrust Authority is set to block the merger between Mizrahi Tefahot Bank Ltd. and Union Bank of Israel Ltd. in the week of May 28, Globes reported, citing unnamed sources.
The regulator explained its reasoning to the lenders in the week of May 14 and has asked them to attend final hearings before it pronounces its decision, Globes reported.
The regulator had flagged concerns related to Mizrahi Tefahot Bank's position as Israel's largest mortgage lender and the possible ramifications of the merger on credit for the diamond industry. It had also noted that Union Bank of Israel had added around 6,000 customers during the year, indicating that it was helping to boost competition in the Israeli market.
Union Bank shareholders are preparing to appeal against the regulator's impending decision before the Restrictive Trade Practices Tribunal, the newspaper reported, adding however that Mizrahi Tefahot may opt simply to back out of the tie-up.
Union Bank shareholder Shlomo Eliyahu Holdings Ltd., a vehicle for investor Shlomo Eliahu, must sell its 27% stake in Union Bank because he also controls an Israeli insurer, the report noted. With Union Bank shares already down 13% on reports of the deal's pending rejection, shareholders in the bank are being forced to consider alternatives including a liquidation of assets.
That option, which would involve selling assets and real estate while winding down other business, may be deemed preferable to a forced fire sale, Globes said, adding however that it would require approval from the Bank of Israel, which supports the lender's merger with Mizrahi Tefahot.
Meanwhile, Mizrahi Tefahot's shareholders are said to be "rather indifferent" to whether the merger takes place, given that the major benefit to the lender would have been an accounting gain, a capital market source told Globes.
