Credit Card Firm Cal Deal Collapses, Potentially Benefiting Discount Bank

A deal to sell the credit card company Cal, valued at up to 4 billion shekels, is on the verge of collapse due to stringent conditions imposed by the Israel Competition Authority. The authority is demanding that Union, one of the intended buyers and a major shareholder in Super-Pharm, sell its stake in the pharmacy chain. This condition significantly alters the deal's terms for the Horesh family, who own Union, as Super-Pharm is a substantial asset. Union has previously resisted less severe regulatory demands, making the sale of its Super-Pharm shares unlikely.

The Competition Authority's concern centers on data privacy. Cal operates the credit card for Shufersal, a major supermarket chain that owns Be, a direct competitor to Super-Pharm. The authority fears that a significant shareholder in Super-Pharm gaining control of Cal would create an overly sensitive link between the two companies' extensive customer purchasing data, which Cal can analyze in detail.

Discount Bank, which owns 72% of Cal, is now considering keeping the company. The bank had been mandated by law to sell its stake, with Union and Harel initially agreeing to purchase 80% and 20% respectively. However, Cal has faced challenges, including losing the El Al "Fly Card" club to rival Isracard, which has impacted its valuation. Despite this, Cal has shown growth, with revenues rising 7% in the second quarter and its credit portfolio expanding.

The collapse of the deal could ultimately benefit Discount Bank financially. The initial sale price of around 3.7 billion shekels now appears less attractive compared to Cal's continued growth and profitability, especially when compared to the market valuation of Isracard. Discount Bank is exploring several options: seeking regulatory relief to retain Cal, finding a new buyer, or pursuing an initial public offering (IPO) for Cal. The latter option faces potential hurdles from International Bank, which holds the remaining 28% of Cal.