EXHIBIT 1
[TRANSLATION]
INDUSTRIAL DEVELOPMENT BANK OF ISRAEL LTD.
January 15, 2008
TEL AVIV STOCK EXCHANGE SECURITIES AUTHORITY
www.tase.co.il www.isa.gov.il
IMMEDIATE REPORT OF AN EVENT OR MATTER DEVIATING FROM THE
COMPANY'S REGULAR COURSE OF BUSINESS
Subject of the Event: Proposal for the Distribution of the Consideration
from the Blueprint
Further to the examination of the blueprint for the sale of the Bank's shares,
details of which were provided by the Bank in its Immediate and Quarterly
Reports, Prof. A. Barnea was asked by the State of Israel and by other
shareholders of the Bank to prepare a proposal for the distribution of the
consideration which will be received from the implementation of the blueprint
(if and when the blueprint will be carried out) among the various shareholders
of the Bank.
Among the shareholders who requested the preparation of the proposal are
included the holders of the preference shares who filed the action regarding
renewal of the distribution of the dividend, Bank Leumi, Bank Hapoalim and Bank
Discount and some of the holders of the Bank's preferred ordinary shares.
The proposal prepared by Prof. A. Barnea is meant to assist the State and the
above shareholders to formulate understandings among them which will permit the
furtherance or the implementation of the blueprint, and it is dated January 13,
2008. A copy of the proposal was given to the Bank yesterday, January 14, 2008.
For the purpose of determining the formula of the distribution, Prof. A. Barnea
estimated the value of the Bank's assets and the rights of the holders of the
preference shares (shares of the classes C, CC, CC1, D and DD) in two scenarios:
the sale of the Bank as a going concern (implementation of the blueprint) and of
the dissolution the Bank. These estimates were made by him based upon the Bank's
financial statements as of September 30, 2007 and the exchange rate of the
dollar at that time, NIS 4.013. Within the framework of these estimates, Prof.
A. Barnea does not refer to the right claimed by the Bank to receive interest on
its perpetual deposits with the Finance Ministry against the distribution
dividend in arrears for its preference shares (a topic about which the Bank
filed an appeal to the Supreme Court), however on the other hand he assumes that
the Bank will receive back from the Bank of Israel the amounts of interest above
"the Bank of Israel Interest", in the amount of NIS 79 million, which the Bank
was charged by the Bank of Israel from August 2002 until July 2003. Prof. A.
Barnea explicitly states in the proposal that he was not asked and he did not
prepare a "value estimate" of the Bank and that the data presented by him are
therefore only indicative and are meant to allow the holders of all the classes
of shares to quantitatively examine the amount of consideration allocated for
him.
Based upon the above factors, Prof. A. Barnea values the Bank in dissolution in
the amount of NIS 484 million and the value of the Bank as a "going concern"
(meaning, its sale within the framework of the blueprint) in the amount of NIS
684 million. In the estimates of the two scenarios, Prof. A. Barnea takes into
account a certain discount regarding the sale of the Bank's credit portfolio (in
dissolution, 15% on the non-problematic credit and 40% on the problematic credit
and as a "going concern", 5% and 10%, respectively), and in the scenario of the
sale of the Bank as a "going concern" he gives a value to the accumulated losses
for tax purposes of the Bank (about 10% of losses totaling about NIS 600
million) and adds a value for the business platform of the Bank (NIS 10-15
million). For the purpose of calculating the manner by which to distribute the
consideration which will be received from the sale of the shares of the Bank in
the framework of the blueprint, Prof. A. Barnea designates the first amounts
received, for the purpose of the return of the paid-up capital of the preference
shares from classes C, CC, CC1 ("C") - shares held by the public - and of the
preference shares from class D and DD ("D") held by the State of Israel
(according to the blueprint, the remaining D and DD shares, which are held by
the public, are supposed to be redeemed) and the payment of the preference
dividend in arrears for these shares (6% per annum for the "C" and 7.5% per
annum on the "D") until the full payment of the paid-up capital and the dividend
in arrears, and this by a pro-rata distribution among the shares (subject to the
hereinafter), and also for the purpose of compensating the holders of the Bank's
preferred ordinary shares. In light of the pending claim against the State for
the payment of interest on the Bank's perpetual deposits with the Finance
Ministry "back-to-back" with the payment of the dividend in arrears for the "C"
(and "D") shares, Prof. A. Barnea shifts, in his proposed distribution, the
amount of NIS 28 million (50% from the preference dividend in arrears on the "C"
as of September 30, 2007) from the allotment of the State to the allotment of
the holders of "C", as determined pursuant to the above pro-rata distribution.
The minimum amount for the sale of the shares of the Bank as a "going concern",
which serves as a starting point for Prof. A. Barnea's calculations, is the
value of the Bank in dissolution (NIS 484 million) net the amount of principal
the Bank is expected to pay out of its capital for the redemption of the "D" not
held by the State (NIS 33 million), and a total of NIS 451 million.
The distribution table which is consequently proposed by Prof. A. Barnea is as
follows:
DISTRIBUTION OF THE CONSIDERATION FROM THE SALE OF THE BANK
AS A GOING CONCERN (IN NIS MILLIONS, AS OF SEPTEMBER 30, 2007)
C AND D PREFERRED ORDINARY A C AND D
AMOUNT PREFERENCE ORDINARY SHARES PREFERENCE
RECEIVED SHARES SHARES (INCLUDING B1) SHARES
------- -------- -------- ---------------------- -----------------------------------
%
RETURN
TO C
STATE STATE PREFERENCE
OF OF SHARE-
ISRAEL OTHERS ISRAEL PUBLIC HOLDERS
------- -------- -------- -------- -------- -------- -------- --------
450 442 8 0 0 238 204 88%
500 488 12 0 0 266 222 95%
550 525 15 5.5 4.5 291 234 100%
600 563 18 11 8 329 234 100%
650 589 21 22 18 355 234 100%
700 589 23 48.5 39.5 355 234 100%
750 589 23 76 62 355 234 100%
Details regarding Prof. A. Barnea's education are attached hereto as an integral
part of this Immediate Report.
The Bank wishes to point out that the document prepared by Prof. A. Barnea was
not commissioned by the Bank and it brings it to the knowledge of the public due
to the prudence demanded by the special circumstances of the Bank, including the
examination of the blueprint for the sale of its shares, and so that all the
shareholders of the Bank shall have equal information concerning the proceedings
taking place to determine the consideration that will be received by the various
shareholders of the Bank, if and when the implementation of all the parts of the
blueprint will be completed.
It should be emphasized that the document prepared by Prof. A. Barnea is at this
stage a proposal only, that the Bank has no knowledge if the shareholders who
asked for the preparation of the document concur with its content and its
proposal and that the estimates and evaluations contained in the document are
those of Prof. A. Barnea only and therefore should not be viewed as estimates
and evaluations on behalf of the Bank or obligating the Bank.
The date and time when the Company was first made aware of the event or matter:
January 14, 2008 at 10:30 P.M.