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The conflicts of Danny Dankner

The conflicts of Danny Dankner - Israel - Analysis - Commentary

During the 1990s, the Dankner family was an economic power in Israel. They owned the controlling interest in Salt Industries, which does make salt and which also owned a controlling interest in Hapoalim, Israel's biggest bank. They owned Dor Chemicals and Dankner Investments, a holding company.

Ten years later, most of the family members have fallen from their former status and riches. There are two notable exceptions: Nochi Dankner, who built himself a completely separate empire through the IDB group, and Danny Dankner, a man in the middle of an unprecedented conflict between the bank that employs him and the Bank of Israel.

Dankner owns 12.8% of Elran Investments, which seems to be nearing the end of its road. And he's the chairman of Hapoalim, still the largest bank in the country.

Being simultaneously the chairman of Hapoalim and a controlling shareholder in a company that's desperately scrabbling about for funding resources has led Danny Dankner into sticky situations and potential conflicts of interest. All speculation aside, it is known that Hapoalim paid generous compensation to a company that, at roughly the same time, came to the rescue of a company in which Dankner was involved, by buying its assets.

A close look at the manner in which Bank Hapoalim bought its controlling interest in the Turkish bank C-Kredi ve Kalkinma Bankasi Anonim Sirketi drives home the point about the potentially conflicted chairman. Figuring the Israeli market was largely saturated - it already was the biggest bank in the land, with the most branches - Bank Hapoalim sought to expand into developing and emerging markets. It chose Turkey as a target market.

In December 2005 Bank Hapoalim inked the agreement, to acquire a 57.55% controlling stake in C-Kredi, now known as BankPozitif, for $100 million. The investment was completed a year later, in November 2006.

C-Kredi's price was based on a shareholders equity value of $66 million plus a 1.7% premium.

But Hapoalim didn't dive into Turkey all by its lonesome. It linked hands with RP Explorer Master Fund, a company registered in the Cayman Islands and owned by Rafael Berber and Petr Kellner. RP was to purchase 7.45% of the Turkish bank for $15 million.

Under the investment agreement, RP also received a 12-month option to buy some of the shares in BankPozitif that Bank Hapoalim was buying. The option covered a sum up to $15 million, and up to 7.45% of the bank's stock.


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