Israel's Competition Authority Threatens to Derail $1 Billion Credit Card Deal

The potential acquisition of Cal, an Israeli credit card company, by the Union Group for approximately $1 billion (NIS 4 billion) is facing significant hurdles from the Israel Competition Authority. The authority, led by Adv. Michal Cohen, is reportedly demanding that the Union Group, owned by the Horesh family, refrain from appointing any directors to Cal's board if the deal is finalized. Union Group, despite being open to various compromises, opposes this demand, which they argue would prevent them from effectively managing the company post-acquisition.

The Competition Authority's primary concern stems from a potential conflict of interest. Union Group holds a 35% stake in Super-Pharm, a major pharmacy chain. Cal, meanwhile, issues credit cards for Shufersal, which operates Be, Israel's second-largest pharmacy chain. The authority fears that allowing Union Group to control Cal would grant them unparalleled access to sensitive market information, potentially dominating the Israeli pharmacy sector. The authority's director general, Eyal Golan, is specifically opposed to being appointed to Cal's board.

If an agreement is not reached behind the scenes, the Competition Authority may issue a public demand, likely leading to the deal's collapse. The acquisition, intended to comply with Israel's Strum Law requiring banks to divest from credit card companies, has already been in the works for two years. Discount Bank, which is selling its controlling stake in Cal, has invested considerable resources into the sale and is reportedly concerned about its ability to find another buyer if this deal falls through, especially given the limited number of domestic entities capable of such a large acquisition.

The situation is further complicated by the minority shareholder, International Bank, which reportedly opposes an initial public offering (IPO) as an alternative to the sale. Discount Bank has appealed to the Bank of Israel and the Ministry of Finance for guidance, hinting at a desire for an exemption from the sale requirement, though such an exemption is unlikely. The prolonged uncertainty has also impacted Cal's operations, with CEO Yafit Grani navigating the company amidst the unresolved sale.

This is not the first time the Competition Authority has intervened in major financial deals. Previously, it complicated and ultimately scuttled Harel Insurance's acquisition of Isracard. While Harel reduced its stake in the current Cal acquisition to mitigate concerns, the primary obstacle has now shifted to Union Group's proposed board representation.