Israel's Hapoalim in Talks to Acquire 75% of SDM-Bank

JERUSALEM -- Bank Hapoalim, Israel's second-biggest lender by assets, is in talks to buy at least 75 percent of Russia's SDM-Bank in a transaction that values the lender at as much as $160 million.

Hapoalim is holding the talks with SDM's chairman, Anatoly Landsman, who represents the controlling shareholders, Hapoalim said in a statement Monday to the Tel Aviv Stock Exchange. SDM had equity of $50 million and assets of $500 million at the end of the third quarter, Hapoalim said.

Tel Aviv-based Hapoalim published the statement after the Globes daily reported the negotiations earlier Monday. The bank denied the Globes report that it was in talks to resell to the European Bank for Reconstruction and Development part of the SDM stake it will buy.

Hapoalim and bigger rival Bank Leumi Le-Israel are expanding overseas as regulators force them to sell their asset-management businesses and block them from expanding their share of the domestic banking market. Earlier this year, Hapoalim bought Turkey's Bank Pozitif Ve Kalkinma Bankasi A.S., which in turn bought Kazakhstan's Demir Kazakhstan Bank last month.

"Going overseas is the only growth engine for Bank Hapoalim," said Lior Rabinovitz, an analyst at Israel Brokerage & Investments in Tel Aviv. "The Russian banking sector has a lot of growth potential. Hapoalim paid a fair price."

Hapoalim said the talks with Landsman valued SDM at $140 million to $160 million. Completion of the acquisition and the final valuation require due diligence and regulatory approval.

SDM has branches in Moscow, Saint Petersburg, Voronezh, Perm, Krasnoyarsk, Nizhny Novgorod, Tver, Omsk and Rostov-on-Don, according to the bank's web site. It was founded in 1991.