ROSH HA'AYIN, Israel, January 12 /PRNewswire-FirstCall/ -- Further to its announcement dated December 30, 2008, regarding the reorganization of its retail activities under its wholly owned subsidiary, Blue Square Chain Investments and Properties Ltd. ('BSIP'), and regarding the suggested reorganization of its real estate activities, Blue Square - Israel Ltd. (NYSE:BSI) (the 'Company') announced today that further to the transfer of the Company's real estate assets to its subsidiary, Blue Square Real Estate Ltd. ('BSRE') and the IPO of BSRE completed in 2006, the company's Board of Directors and BSRE Audit Committee and Board of Directors have approved a reorganization of all of the Company's real estate properties, to be transferred to BSRE (held 80% by the company). Following the completion of the transaction, all real property will be held by BSRE, and all the food retail activities will be centralized in BSIP.

Within the approved transaction, all real estate property (and related leases) held by BSIP and BSIP's subsidiaries would be transferred to BSRE. Most of such real estate property will be leased back by BSRE to BSIP for its retail activities under terms similar to the existing lease agreements between BSRE and BSIP, and the Company, regarding other real estate assets. The periods of these existing lease agreements would be extended to match the period of the new lease agreement - 10 years from the transfer of the BSIP real estate assets to BSRE, with an additional option period of five years exercisable by BSIP.

The sale of BSIP's real estate property (and related leases) to BSRE would be for an aggregate consideration of approx. NIS 464 million, based on an appraisal by an independent appraiser. BSRE plans to finance 50% of the consideration from its existing sources and 50% by a financial institute.