Union-Harel Cancels NIS 4 Billion Cal Acquisition, Pays NIS 187 Million Penalty

The Union-Harel consortium has called off its acquisition of the credit card company Cal, just one day after the Israel Competition Authority announced it would approve the deal only if Union sold its holdings in the Super-Pharm drugstore chain. As a consequence of the canceled deal, Union and Harel will pay NIS 187 million in cash to Cal's current shareholders, primarily Discount Bank (72%) and International Bank (28%). Union, which constitutes 80% of the purchasing group, will bear NIS 150 million of the penalty, while Harel will pay the remaining NIS 37 million.

Discount Bank will receive NIS 135 million from the payout, and International Bank will get NIS 52 million. Despite the substantial compensation, the amount is not expected to significantly impact the banks' financial results, given Discount Bank's NIS 1.2 billion net profit and International Bank's NIS 583 million profit in the second quarter. The original deal, signed a year ago, valued Cal at NIS 4 billion, with a final closing date of November 1.

While Union and Harel have the option to appeal to the Competition Tribunal, past experience suggests this is a lengthy process, making it likely they will forgo it. The cancellation leaves some parties better off and others facing challenges. Discount Bank, managed by Avi Levi, may struggle to find a similar offer for Cal, whose value has been impacted by the loss of the Flycard club to competitor Isracard and the looming regulatory deadline for its sale by April 2027. The bank has requested an extension from the Bank of Israel and the Ministry of Finance.

An alternative for Discount Bank is to list Cal on the stock exchange, similar to what Bank Hapoalim did with Isracard. However, International Bank, controlled by Zadik Bino, holds a key position as a minority shareholder and its agreement would be crucial for an IPO. There are indications that International Bank might not oppose an IPO if coordinated with its needs. Cal's CEO, Yafit Gariani, appointed in late 2025 after leaving Isracard, may personally benefit from the deal's collapse, as her future role under new owners was uncertain.

The Competition Authority, led by Michal Cohen, is seen as a strengthened regulator that meticulously examines large transactions. The initial deal structure had already accounted for potential regulatory hurdles regarding an insurance company, but Union's stake in Super-Pharm proved to be the insurmountable obstacle. While the authority faces criticism for potentially hindering deals, the long-term outcome could foster greater competition in the credit card market.