Apax Buys Israeli Investment Firm Psagot

Private equity shop Apax Partners has acquired Israeli investment firm Psagot, Reuters reported. New York-based Apax paid roughly 2.08 billion shekels ($572.5 million) for a 76.8% stake in Psagot. Though signed last December, a close of the acquisition was put on hold until now because Psagot was the subject of an Israeli securities fraud investigation. U.S.-Israeli investment fund Markstone Capital owns the remaining 23.2 percent of Psagot.

(Reuters) – Private equity firm Apax Partners [APAX.UL] has bought 76.8 percent of Psagot after the state prosecutor closed an investigation against Israel’s largest investment house regarding suspected fraudulent trading.

The deal, which had originally been signed last December, was held up by an investigation by the Israel Securities Authority (ISA).

An announcement by the state prosceutor’s office that it was closing the investigation against Psagot in exchange for a 150 million Israeli shekel ($41.3 million) fine enabled Apax finally to seal the deal.

Criminal investigations against managers at Psagot will continue, the prosecutor’s office said in a statement.

In a statement to the Tel Aviv Stock Exchange on Sunday, Psagot did not disclose the price at which the deal closed but a market source told Reuters that Apax paid York Capital Management 2.08 billion shekels for the stake, which values all of Psagot at 2.75 billion shekels.

The deal signed in December valued Psagot at 3.1 billion shekels.

The prosecutor’s office said Apax agreed to dimiss any employees involved in wrongdoing and implement internal controls to prevent similar cases in the future.

The prosecutor’s office reached the conclusion that closing the investigation against Psagot was in the public’s interest and that bringing Psagot “to trial could cause heavy damage to a large number of investors”, the statement said.

U.S.-Israeli investment fund Markstone Capital owns the other 23.2 percent of Psagot, which manages assets of 140 billion shekels.

The ISA had said in February it suspected former Psagot executives David Edry and Shai Ben-David made proprietary investments designed to manipulate the value of various securities in an attempt to boost the investment house’s profits and their bonuses.

The alleged offences occurred between 2007 and 2009, when Edry was vice president at Psagot subsidiary Psagot Securities, and Ben David served as trading room manager at Psagot. Other people came under suspicion for allegedly aiding the fraud.

Reporting by Tova Cohen; Editing by Michael Shields