Isracard Cancels Digital Bank Esh Acquisition Amid Market Pressure and Integration Challenges

Four months after signing a memorandum of understanding, Isracard, controlled by Idan Ofer's Delek Group and led by CEO Itamar Forman, has terminated its planned acquisition of the digital bank Esh. The deal valued Esh at up to 500 million shekels, including 400 million upfront and milestone payments. However, negotiations collapsed last weekend, with Isracard announcing on Sunday evening that the memorandum had expired without extension and no binding agreements were signed. It remains unclear if talks might resume in the future.

Isracard indicated that the due diligence process revealed concerns, particularly regarding Esh's readiness and the timeline for fully operational banking services. The credit card company, eager to enter banking quickly, apparently found Esh's technological maturity insufficient for its needs. This development comes amid a sharp 30% drop in Isracard's share price over three months, erasing a near 1 billion shekel paper profit Delek had gained from acquiring Isracard earlier in 2025.

Simultaneously, Isracard signed a 10-year agreement to issue El Al's frequent flyer credit cards, expected to add hundreds of thousands of customers but reduce 2026 profits by 110 to 150 million shekels before tax. This dual challenge may have dampened investor enthusiasm and Isracard's appetite to finalize the Esh deal.

Despite the setback, Delek remains committed to transforming Isracard into a "lean bank" offering deposits and loans under lighter regulation, as stated by Delek CEO Idan Wells. Forman, who joined Isracard in February from Bank Hapoalim, continues to prepare the company for banking entry, possibly leveraging its existing platform for small business banking services or acquiring foreign technology.

Sources suggest the deal nearly closed but fell apart over minor issues, with one insider noting that if Esh co-founder Nir Zuk had been in Israel, the acquisition might have succeeded. Meanwhile, Esh will likely focus on independently advancing its technology and commercial launch, which has been delayed beyond optimistic projections. Esh's sister company, Esh OS, develops the digital bank's operating system and was set to receive a $40 million investment from Isracard for a 25% stake as part of the deal.

Esh stated that it continues operations despite the memorandum's expiration and remains committed to its vision of fair banking, aiming to remove Bank of Israel restrictions and open to the public in the coming months.