The Antitrust Authority is expected to allow

Migdal Insurance (TASE:

MGDL

) to buy out the Ofer brothers' 26% stake in

United Mizrahi Bank (TASE:

MZRH

), contingent on the insurance company selling its 9.5% interest in

Bank Leumi (TASE:

LUMI

).

Also, Leumi will be required to sell its 20% stake in Migdal, in order to sever business relations between the two groups. The trustbuster's aim is to prevent Leumi and Migdal from improperly turning Mizrahi into a kind of subsidiary of the bigger bank.

Talks on the dealings began a month ago, and although the antitrust hurdles may be overcome, there is another problem that could torpedo the whole shakeup.

Sources in the banking establishment note that if Migdal sells its Leumi stake, it will have to absorb a huge charge on the chasm between the bank's current share price on the Tel Aviv Stock Exchange, and its value in Migdal's books.

Migdal spent about a billion shekels buying an 8% interest in Leumi. That stake has dropped in value to about NIS 700 million on the market, creating an NIS 300 million hole. Moreover, the insurer holds another 1.5% of the bank's equity through life insurance policies.

Migdal, which is controlled by the Italian insurance giant

Generali

, has not mentioned intentions of making a provision for that difference.