Competition Authority's Demand Scuttles Cal Credit Card Deal, Potentially Benefiting Discount Bank

A significant deal for the sale of Cal, a major Israeli credit card company, is on the verge of collapse due to a stringent condition imposed by the Israel Competition Authority. The authority is demanding that Union, one of the intended buyers, sell its substantial stake in the Super-Pharm drugstore chain before acquiring Cal. This condition fundamentally alters the transaction, as Union, controlled by the Horesh family, views its Super-Pharm holding as a valuable asset and has previously resisted less severe regulatory impositions.

The Competition Authority's concern centers on data privacy and potential conflicts of interest. Cal operates the credit card club for Shufersal, a supermarket chain that owns Be, a direct competitor to Super-Pharm. The authority fears that a single entity controlling both Union and Cal could gain access to sensitive purchasing data from both Super-Pharm and Shufersal customers, creating an unacceptable overlap. The condition requires Union to divest its approximately 37% stake in Super-Pharm before the merger is finalized.

Union has already indicated it has no intention of selling its Super-Pharm shares, making the completion of the deal in its current form highly unlikely. This development poses a challenge for Discount Bank, which is obligated by law to sell its controlling stake in Cal. The bank had invested over a year in the sale process, agreeing to sell 80% of Cal to Union and Harel for an estimated NIS 3.7 to 4 billion.

However, the potential collapse of the sale might not be entirely negative for Discount Bank. The bank is now considering retaining Cal, arguing that the original sale price may have undervalued the company, especially given its continued growth and profitability. Cal recently reported strong financial results, with revenues rising and its credit portfolio expanding. Discount Bank is exploring several options, including seeking regulatory relief to allow it to keep Cal, finding a new buyer, or pursuing an initial public offering (IPO) for the company. The bank is also facing a deadline of May 2027 to divest its stake, adding urgency to its decision-making process.