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Valley Bank to acquire Bank Leumi’s US unit in merger agreement

Deal values Bank Leumi USA at $1.2 billion; bank expected to report profit of $203-$234 million from transaction

Ricky Ben-David is The Times of Israel’s Startups and Business editor and reporter.

Illustrative: Israelis walks next to Bank Leumi in Jerusalem, on November 16, 2014. (Yonatan Sindel/Flash90)
Illustrative: Israelis walks next to Bank Leumi in Jerusalem, on November 16, 2014. (Yonatan Sindel/Flash90)

After months of speculation, Israel’s Bank Leumi announced on Thursday that New Jersey-based Valley National Bancorp (Valley Bank) would acquire Bank Leumi USA, the bank’s United States operations, in a merger agreement that values the unit at approximately $1.2 billion.

Bank Leumi, one of Israel’s two largest banks, said that it is expected to report a profit of NIS 650-750 million ($203-$234 million) from the deal and would hold just over 14 percent of the merged bank stocks after the merger.

Approximately 90% of the proceeds for the transaction will be paid in the form of Valley common stock, with the remainder in cash, according to the announcement on Thursday.

Valley Bank has reported total assets of approximately $41 billion pre-transaction with a credit portfolio of about $32 billion, as of June this year. Profits for the first half of 2021 amounted to $230 million, the bank said.

Bank Leumi, meanwhile, reported total assets of $8.4 billion, total deposits of $7.1 billion, and gross loans of $5.4 billion, as of June. It operates five commercial offices in the US, in New York, Los Angeles, Palo Alto, Chicago, and Miami.

The merged bank is set to become the 29th largest bank traded on the US stock exchange, and “will be well-positioned to grow its business activity in a variety of strategic areas, some of which Bank Leumi USA already has unique expertise in including high-tech, venture capital, real estate development and private banking,” Bank Leumi said, adding that the agreement also expands its exposure to the US banking market.

Bank Leumi CEO Hanan Friedman said in a statement that the move was “a strategic move designed to deepen and expand our exposure to the US. The merger will provide Leumi significant and unprecedented presence and market access for an Israeli bank in the US.”

The bank’s US employees will be integrated into the merged bank, he indicated.

Bank Leumi USA CEO Avner Mendelson added that the merger was “a natural step and a strategic milestone in our journey to reinforce our operations and our unique value proposition in the US market.”

Mendelson is expected to serve as vice chairman in the merged bank.

Ira Robbins, Valley Bank chairman, president, and CEO said that leveraging Bank Leumi USA’s operations “will represent the next exciting phase of our evolution as a premier full-service commercial bank.”

The transaction is expected to close in the late first quarter or early second quarter of 2022, subject to required regulatory approvals and approval of Valley shareholders, the parties indicated.

Bank Leumi has reportedly been looking to sell off its US unit for some time, and has faced its shares of difficulties in the country.

In 2014, the bank agreed to pay some $400 million to US regulators to settle a criminal probe, after admitting it helped US taxpayers hide assets.

According to the investigation, from at least 2000 until early 2011, Leumi sent private bankers from Israel and elsewhere to meet with US taxpayers and help them conceal assets at Leumi locations in Israel, Switzerland, and Luxembourg, documents revealed at the time.

The US Attorney’s Office has since gone after additional Israeli banks for allegedly helping US citizens avoid paying taxes by stashing their assets in offshore accounts.

The investigations have caused Israeli banks to decrease their activities abroad, and there has been a dramatic drop in the number of deposits held by foreign residents in Israeli banks, the Bank of Israel said in 2019.

Agencies contributed to this report.

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