The Safra banking family has hired prestigious investment bank Merrill Lynch to handle its negotiations to buy Israel Discount Bank of New York, TheMarker has learned.

Joseph Safra met with Finance Minister Silvan Shalom two weeks ago to discuss the purchase, indicating the family's seriousness about the deal.

The State of Israel owns the 42% controlling stake in Bank Discount, the parent company of the sought-after New York unit.

The Safras, Moise and Joseph, also own the controlling interest in First International Bank of Israel.

They face fierce competition over Discount New York. Other contenders include banks Hapoalim and Leumi.

Merrill Lynch representatives are expected to meet soon with people from MI Holdings, which controls Israel's government companies.

Banking sources surmise that the Safras would prefer to buy out the whole Discount operation, not only its unit in New York. The Safras have denied such intentions.