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SOARD OF' GDVERNDRS

D' 114 t

FEDERAL RESERVE SYSTEM W"5HIN~TDN. D. t;. ClOSSI

SCOTT G....I.VARe:t

OEt-I,RAl COI./N5EI.

July 31, 2008

Gary Rice, Esq.

Simpson Thacher &Bartlett LLP

425 Lexington Avenue .

New York, New York 10017-3954

Dear Mr. Rice:

This responds to your letter dated March 14, 2008, and subsequent

correspondence, requesting a determination that an application under the Bank Holding

Company Act ("BHC ACt")l would not be required in connection with certain reorganizations of

the Bronfinan Group and the subsequent exercise ofan option ("lOB Option") by the Bronfman

Group and the Schron Group2 to acquire an additional 25 percent ofthe voting shares ofIsrael

Discount Bank ("JOB"), Tel Aviv, Israel, the foreign bank parent ofIsrael Discount Bank·of

New York ("IDB-NY''), New York, New York, a New York state nonmember bank. The

Bronfman Group and the Schron Group received the Board's approval to jointly acquire up to

51 percent ofthe voting shares oflDB, including authority to exercise the IDB Option, on

December 16,2005. The parties, however, did not exercise the option within the time frame

required by the Board Order.3

I 12 U.S.C. § 1841, et seg.

2 The two investor groups seeking to exercise the IDB Option may be classified as the

"Bronfinan Group" and the "Sehron Group.» The Bronfinan Group consists ofthe following

entities: Edgar M. Bronfinan IDB Trusts A through G ("EMB IDB Trusts"), Quebec, Canada;

Treetops Acquisition Group Ltd. ("Treetops AO") and Treetops Acquisition Group LP

("Treetops''), both in Grand Cayman, Cayman Islands; three Bronfman-affiliatcd trusts

("Bronfman Minority Trosts); and three Bronfman-affiliated individual investors ("4Bronfman

Individual Investors''). The EMB IDB Trusts, the BronfmanMinority Trusts, and the Bronfman

Individual Investors arc limited partners ofTreetops. Treetops AG is the genend partner of

Treetops, and is, in tum, wbolly-owned by the EMB IDB Trusts, the Bronfman Minority Trusts,

and the Bronfman Individual Investors. The Sehron Group consists ofthe fotJowing entities:

Cam-Discount Ltd.; Treetops Acquisition Group nLtd. ("'Treetops AG II''); and Treetops

Acquisition II LP ('"Treetops U"), all in Grand Cayman. Cayman Islands. Cam-Discount'Ltd. is

the sole limited partner ofTreetops IT. Treetops AO II is wholly-owned by Cam-Discount Ltd..

and is the general partner ofTreetops ll.

3 See Treeto.ps Acqpisition Group LP, 92 Federal Res. Bull. C46 (2006). In keeping with the

Board's longstanding practice, the Order provided a three-month period to consummate the

transaction. At present, the Bronfinan Group, through Treetops, owns approximately 16 percent
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You have indicated that the proposed transaction would proceed concurrently for

the Bronfinan and Schron Groups in the steps as described below. .

Exercise ofthe IDB Option by the Bronftnan Group

(1) The EMB lOB Trusts. registered bank holding companies, would combine into a

single trust; specifically, the Edgar M. Bronfman IDB Trusts B through G will

merge into the Edgar M. Bronfman IDB Trust A ("EMB IDB Trust A"), with the

EMB IDB Trost A as the survivor.

(4) Treetops would exercise the Bronfman Group's option to purchase additional

shares ofIDB by acquiring approximately 15 percent ofthe voting shares ofIDB. - -

As aconsequence,

the Bronfman Group would hold approximately percent ofthe voting shares of

IDB.

(6) Through a series oftransactiODS. the lOB Clone Trost would be extinguished.

The effect ofthese steps is to consolidate the EMB IDB Trusts into a single bank holding

company, and to allowthe Bronfman Group, collectively, to control percent ofthe voting

shares ofIDB at the end ofthe proposed transaction

Exercise ofthe IDB Option by the Schron GroYl'

(1) Treetops II would exercise the Sehron Group's option to purchase additional

shares oflDB by acquiring approximately 10 percent ofthe voting shares ofIDB.

ofthe voting shares ofIDB. and the Semon Group, through Treetops II, owns approximately

10 percent ofthe voting shares ofJDB.
.......... .......:;, .

~3-

Section 3 ofthe BHC Act requires approval by the Board before a bank holding

company may take any action that causes a bank to become a subsidiary ofthe bank holding

company, or acquiTe direct or indirect ownership or control ofmore than 5 percent ofthe voting

shares ofa bank.4 As described above, by exercising the IDB Option, the Bronfinan Group and

the Schron Group, through Treetops and Treetops II, would increase their ownership oftbe

shares ofIDB, and th~by acquire indirectly additional shares ofInB-NY. As part ofthe

transaction proposed by the Bronftnan Group, the EMS IDB Trusts would combine into a single

bank holding company, and the IDB Clone Trost would indirectly hold the shares ofIDB-NY for

a briefperiod oftime ' .

Accordingly, the Board's approval tmaetsecuon j ofthe BHC Act for all ofthese

transactions would ordinarily be required. .

As you have noted in your letter, the Board has previously approved the

application by the Bronfinan Group and the Schron Group to collectively acquire up to

51 percent ofthe voting shares oflDB. The exercise ofthe IDB Option by the Bronfman Group

and the Semon Group is sorely for the purpose ofexecuting the transaction that was previously

reviewed and approved by the Board and, after consummation ofthe exercise ofthe IDB Option,

the combined shareholdings would equal approximately percent ofthe voting shares ofIDB,

which is within the level approved by the Board. In addition, the horizontal consolidation ofthe

existing bank holding companies, EMB IDB Trusts, into a single bank holding company, EMB

IDB Trost A, is a reorganization of existing BHCs that were already approved by the Board in

connection with the approval received by the Bronfman Group to acquire IDB shares in 2005.

No part ofthis proposal would result in a change in the management or operations oflDB. The

Bronfinan and Scbron Groups have submitted sufficient fInancial, managerial and other

information to Board staffto demonstrate their ability to execute the IDB Option and that those

reSOlD'ces continue to be consistent with the factors reviewed and findings made by the Board in

200S.

Based on all the facts ofrecord, the Legal Division has determined that no

regulatory purpose would be served by requiring the Bronfman Group and the Schron Group to

file an appli~tion under the BHe,Act for the proposed exercise ofthe IDB Option or for the

Bronfinan Group to consolidate the EMB lOB Trusts into a single entity. The Legal Division,

therefore, would not recommend that the Board take action to require a filing offormal

application by the Bronfinan Group and the Semon Group in connection with the transactions

described above.s To the extent your letter serves as a request to extend the time for performing

a condition imposed in writing by the Board in connection with its findings and decision on the

application filed by the Bronfinan and Semon Groups to acquire up to 51 percent ofthe voting

shares ofIDB in 2005, the Director ofthe Division ofBanking Supervision and Regulation

hereby consents to allowthe Bronfinan and Schron Groups to exercise the lOB Option.

See 12 U.S.C. § 1842.

s You have represented that the partiesto the proposed transaction either have received other

regulatory approvals required by the proposed transaction or have confirmed that no regulatory

approval is required in connection with the proposed transaction, including by the Government

oflsrael.
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This opinion is based on the specific :facts and representations in your letter and in

commWlications withBoard st~ and any change in the facts orrepresentations should be

communicated immediately to Board staff and could result in a different conclusion. This

opinion also is limited to the exercise ofthe !DB Option and the consolidation ofth.e EMB IDB

Trusts, and it does not apply to any othertransaction. In addition, this letter should not be

construed as granting relieffrom any other conditions or commitments to which the Bronfman

and Schron Groups may be subject

Ifyou have any questions regarding this matter, please contact Claudia von

Pervieux ofmy stdat (202) 452-2552.

Sincerely,

~it;/j cc: Federal Reserve Bank ofNew York

Bank ofIsrael

New York Department ofBanking