Blue Square's Subsidiary, BSIP, Closes Sale Of Hamashbir Department Stores.

GIVATAYIM, Israel--(BUSINESS WIRE)--Dec. 4, 1998--Blue Square- Israel Ltd. (NYSE: BSI; "BSI") today announced that its subsidiary, Blue Square Investment Properties, Ltd. ("BSIP"), closed the sale of BSIP's entire 79.65% share of Hamashbir Lazarchan Israel Ltd.("Hamashbir") to the Co-Op Blue Square Cooperative Society Ltd. ("the Co-Op"), BSI's largest shareholder, on December 3, 1998. The Co-Op paid a total of New Israeli Shekels ("NIS") 233 million in cash to BSIP, less NIS 47.8 million which will be paid directly as a dividend by Hamashbir to BSIP on December 25, 1998.

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 156 supermarkets under five formats, each offering different levels of service and pricing. Blue Square's 60-year dedication to value, quality, and customer service, along with its innovative marketing vision, has contributed significantly to Israel's current consumer revolution.

The statements contained in this release which are not historical facts contain forward-looking information with respect to plans, projections, or future performance of the Company, the occurrence of which involve certain risks and uncertainties, including risk of market acceptance, the effect of economic conditions, the impact of competitive pricing, supply constraints, the effect of the Company's accounting policies, as well as certain other risks and uncertainties which are detailed in the Company's filings with the Security and Exchange Commission, particularly the prospectus with respect to its public offering in July, 1996.