Discount Bank Faces Investor Lawsuits After Failed Cal Deal

Discount Bank is bracing for potential lawsuits from investors following the collapse of its deal to sell its credit card company, Cal, to George Horesh's Union Group and Harel. The bank faces scrutiny over its decision to favor this offer, which was lower than an earlier bid from Moti Ben-Moshe, despite concerns about competition. The deal stalled after the Antitrust Authority approved it with conditions, including the sale of Union's Super-Pharm holdings, which the buyers rejected.

Union and Harel will pay Discount Bank and International Bank NIS 187 million in compensation for the failed deal. This amount, however, does not resolve the bank's need to find a new path to divest Cal. The bank had initially selected Horesh and Harel's NIS 3.75 billion offer, plus a NIS 250 million option, over Ben-Moshe's NIS 4.18 billion bid. Critics argue that Ben-Moshe's offer likely had a better chance of regulatory approval due to his lack of retail and insurance holdings that could create competition issues.

The failed sale has significant implications for Discount Bank's business plans, impacting its ability to extend credit as it had anticipated using the proceeds from the Cal sale to bolster its capital adequacy. The bank is now preparing for Cal's IPO, but this is complicated by Cal's recent loss of the El Al Flycard club to rival Isracard, which is expected to lower its valuation.

Sources close to the deal blame the Antitrust Authority, led by Michal Cohen, for initially signaling approval before hardening its stance. The Authority, however, states that the parties provided inaccurate information that initially convinced them of the deal's viability. Discount Bank is obligated to sell its Cal shares by May 2027 and has requested an extension from the Treasury, but election period politics may delay a decision. The bank is expected to adhere to the November 1st deadline for the current deal's completion to secure the compensation and pursue the IPO.

Former Bank Leumi CEO Dov Kotler, who had reportedly anticipated a leadership role at Cal, is also considered a significant loser in the deal's collapse.