Discount Bank and Union-Harel Seek to Revive Cal Deal with US Funds
Translated & summarized from Globes by baba
Discount Bank and Union-Harel are attempting to revive their deal to sell Cal, an Israeli credit card company, by bringing in US private equity funds like Geltin Point Capital and Centerbridge. This restructuring aims to reduce Union-Harel's stake below 50% and appease the Competition Authority, which previously blocked the original agreement. The parties are motivated by significant prior investment and a looming deadline for Discount Bank to sell its stake by April 2027, though regulatory approval for the revised deal remains uncertain.
The story in 6 lines · by baba
- Discount Bank and Union-Harel are exploring a revised deal for Cal with US private equity funds to overcome regulatory hurdles.
- The new structure involves reducing Union-Harel's stake to below 50% and bringing in foreign funds for about 30% ownership.
- Potential investors include Geltin Point Capital and Centerbridge, both with experience in the Israeli financial sector.
- This move aims to address Competition Authority concerns about market competition and data usage by local retailers.
- Discount Bank faces a deadline of April 2027 to sell its stake in Cal, adding urgency to the negotiations.
- The Competition Authority's previous delays cast doubt on the speed of approval for the revised transaction.
Discount Bank and Union-Harel are exploring a revised deal to sell Cal, an Israeli credit card company, after the original agreement was blocked by the Competition Authority. The new proposal involves bringing in US private equity funds to acquire a significant stake, potentially around 30%, in Cal. This restructuring aims to reduce Union-Harel's ownership from 80% to below 50%, with Harel retaining its 20% share.
Among the potential investors being considered are Geltin Point Capital, a fund managing $5.6 billion and co-founded by former BlackRock executive Matthew Bouttin and ex-Alliance Partners member Lewis Zacks. Discount Bank has existing business ties with Geltin Point Capital through a New York bank. Another fund, Centerbridge, founded in 2005 and managing over $56 billion, is also being evaluated. Centerbridge, managed by Jeff Aronson, has prior experience with the Israeli financial market, having considered acquiring control of Clal Insurance and previously looking into buying Cal.
The rationale behind this revised structure is to appease the Competition Authority. By introducing professional, foreign investment funds with no broad ties to the Israeli economy, the authorities may find the deal more palatable. These funds are also typically focused on realizing their investments within a few years, which can simplify regulatory oversight. Furthermore, the funds' "exit" orientation is expected to encourage Cal to enhance its business performance and competition, addressing concerns that a group of local retailers might misuse consumer data.
Discount Bank and Union-Harel are motivated to revive the deal due to the significant time and effort invested over nearly two years. The original sale was valued at up to NIS 4 billion, but Cal has since lost its "Flycard" loyalty program, raising concerns about a potential reduction in its valuation. The parties have already negotiated and agreed upon the terms of the original deal, and starting a new negotiation process would be time-consuming. Discount Bank is legally required to complete the sale of its 72% stake in Cal by April 2027, and any significant delays could jeopardize this deadline, especially given potential political instability and the need for a functioning Knesset to secure extensions.
Despite the proposed changes, the Competition Authority's previous lengthy delay in approving the original deal raises questions about whether it will expedite the review of this new structure. While Discount Bank and Union-Harel believe the involvement of foreign funds and the revised ownership model will address the authority's core concerns, the timeline for a renewed approval remains uncertain.
Mentioned
