JERUSALEM, Oct 19 (Reuters) - Leumi, Israel's largest bank, said on Tuesday it was leading a group to buy a 20.7 percent stake in Tnuva, Israel's largest food company, from Mivtach Shamir Partners for 1.23 billion shekels ($342 million).
Leumi, though its investment arm Leumi Partners, will buy 10.36 percent for 615 million shekels and seek investors for the other half.
"We have been approached by investors and all institutions in Israel for the other half," Yaron Bloch, deputy CEO of Leumi Partners, told Reuters.
The deal, in which Leumi signed a letter of understanding, is slated to close later this year or early in 2011 but still needs regulatory approvals as well as a shareholders' agreement with private equity group Apax Partners, which owns a controlling 56 percent stake in Tnuva.
Mivtach Shamir and Apax acquired Tnuva in 2008 in a deal that valued the company at $989 million.
The agreed purchase price values Tnuva at around $1.65 billion. One source close to the matter put its value at more than $2 billion including debt.
Mivtach Shamir was forced to sell its holdings in Tnuva after Israel's securities regulator demanded that it publish Tnuva's financial results since Tnuva is significant holding.
Apax refused on grounds that it did not want competitors to see the results and the regulator in May halted trading in Mivtach Shamir.
"This will keep Tnuva's results private. That's the whole point," Bloch said.
Once the deal is complete, trading in Mivtach Shamir's shares on the Tel Aviv Stock Exchange will resume.
Bloch noted that Leumi had sought to buy Mivtach Shamir's entire stake but the Bank of Israel allowed only half.
Tnuva was founded in 1929 when 620 agricultural settlements formed a cooperative, mainly to market fresh milk. The agricultural settlements still hold 23.3 percent of Tnuva.
($1 = 3.6 shekels) (Reporting by Steven Scheer; Editing by Michael Shields)