Blue Square Announces Negotiations by its Subsidiary to Acquire Control of Naaman Porcelain Ltd., a Company Traded in the Tel Aviv Stock Exchange

ROSH HAAYIN, Israel, July 19 /PRNewswire-FirstCall/ -- Blue Square-Israel Ltd. (hereinafter: "Blue Square") announced today that Hamachsan Hamerkazi Kfar Hashaashuim Ltd, a subsidiary of Blue Square (60%) (hereinafter: the "Subsidiary") is in negotiations to acquire the controlling interest of Naaman Porcelain Ltd. (hereinafter: "Naaman") from its controlling shareholders.

Naaman imports and markets various houseware products, such as kitchen utensils, cutlery and dinner sets. Naaman has its own chain of houseware stores and is a supplier to Blue Square and its subsidiaries. Naaman is traded in the Tel Aviv Stock Exchange.

There is no certainty at this stage that the parties shall reach agreement and/or that the parties shall sign a binding agreement and/or that the transaction shall be completed. Following the signing of any binding agreement, the transaction will be subject to completion of due diligence examination by the Subsidiary, receipt of all necessary corporate approvals by Naaman and the Subsidiary and receipt of all necessary regulatory approvals.

Blue Square-Israel Ltd. is a leading retailer in Israel. A pioneer of modern food retailing, in the region. Blue Square currently operates 180 supermarkets under different formats, each offering varying levels of services and prices. For more information, please refer to the Blue Square-Israel Ltd. website at http://www.bsi.co.il/.

Forward Looking Statements

The statements contained in this release, except for historical facts, which are forward-looking with respect to plans, projections, or future performance of the Company, involve certain risks and uncertainties. Potential risks and uncertainties include, but are not limited to, risk of market acceptance, the effect of economic conditions, the impact of competitive pricing, supply constrains, 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 Securities and Exchange Commission, particularly the Annual Report on Form 20-F for the year ended December 31, 2006.

Contact: Blue Square-Israel Ltd. Elli Levinson-Sela General Counsel & Corporate Secretary Telephone: +972-3-9282670 Fax: +972-3-9282498 Email: ellils@bsi.co.il