Isracard refuses to extend Harel merger deadline

After credit card company Isracard’s share price plunged by more than 14% on Thursday and its market cap was slashed to NIS 2.34 billion, about NIS 1 billion below the valuation at which insurance company Harel is due to buy the company, there is now a new development at the Competition Authority, which has yet to approve the deal. Isracard’s share price fell a further 2.74% this morning.

Harel and Isracard reported to the Tel Aviv Stock Exchange today that the Competition Authority had requested a postponement of the November 12 deadline for completion of the deal. The two companies have already postponed completion several times, by agreement, in response to requests from the Competition Authority. Harel said that it had become clear that there was a very small chance that approval from the Competition Authority would be forthcoming by the final date for fulfilling the preconditions in the agreement, and that the company was examining the implications of this.

A few moments later, Isracard explained in its own report to the stock exchange that it had told the Competition Authority that it would not agree to a thirty-day extension for the decision (to December 1) as the Authority had requested, and that an extension would be given only until the final day for fulfilling the preconditions set out in the agreement, that is, until November 12. Isracard said that the Competition Authority had responded that it would consider a petition to the Competition Tribunal for a longer extension of the timetable for its decision.

Under the agreement between Harel and Isracard, if all the preconditions are not fulfilled by the deadline, each party will be entitled to inform the other of the cancellation of the deal. In that event, Harel will be able to demand an adjustment to the price it is supposed to pay Isracard’s shareholders – NIS 16.5 per share, which compares with a market price of NIS 11.67 after the fall last Thursday. Harel cannot change the price, or withdraw from the deal, before the deadline for completion.

Harel also said that two additional regulatory approvals that represent preconditions for completion of the merger, from the Supervisor of Banks and the Commissioner of Insurance, Savings and Capital Markets, had not yet been received, but that, on the basis of its talks with these regulators, it believed there was a high probability that it would succeed in obtaining them before the existing deadline.

Interest rate halts Isracard’s momentum

The agreement between Harel and Isracard was signed when it was already clear that interest rates in Israel were high and that this was halting Isracard’s growth momentum in providing credit, which the company, headed by chairperson Tamar Yassur and CEO Ran Oz, had marked as its growth engine. The war in the south of Israel, however, and the tension on the northern border, have worsened the slowdown which was in any case expected in the economy, and this is having a strong impact on Isracard, as it is on the entire financial sector in Israel. It could be that this prospect is making more and more Isracard shareholders sell their shares now, fearing that Harel will ask for a discount on the original price, if all requisite approvals are not received by the deadline for completion.

Published by Globes, Israel business news – en.globes.co.il – on October 29, 2023.

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