The takeover of the credit card industry by the major insurance groups in Israel began with a deal signed last year for the purchase of the Max company by Clal Insurance, and has continued in recent weeks with a bidding process for the purchase of Isracard.
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● Menorah Mivathim does not give up: increased Isracard’s purchase offer to NIS 3.5 billion
● The agreement that brought down the stock, and the transaction that made it jump: behind Israchart’s transformation Analysis
After several rounds of price increases, Harel is currently offering NIS 3.3 billion for Isracard as a whole, while Menorah Mvethim offers to purchase the controlling shares (32%) at a company value of NIS 3.5 billion.
On Thursday, another insurance company, Fenix, filed a NIS 120 million claim against Israchart. This is after the Isracard board of directors’ decision last month to advance the sale of the credit card company to Harel closed the gap on cooperation between the companies, which was earlier anchored in the memorandum of understanding to establish a joint venture in the field of consumer credit, at the end of lengthy negotiations.
The Phoenix claims that conducting parallel negotiations with Harel was done in bad faith. “Israchart and the officers who led the negotiations on its behalf violated obligations – contractual and tortious – towards the Phoenix, by hiding the parallel contacts that were conducted with Harel. Beyond the direct damages as a result of loss The time and resources invested in the construction of the project resulted in damages of loss of income and a significant delay in the execution and implementation of the business plan,” they explained.
The cancellation of the joint venture with Isracard, which was designed to allow Phoenix easy access to the world of consumer credit, raises the question of whether it will try to acquire the third credit card company that operates in Israel, Cal, as it will be separated in the coming years from Discount Bank, which owns 72% of it.
It is not impossible that the Phoenix will submit an offer to Ischerchert
At Phoenix, they keep their cards close to their chest, but carefully study the credit card market. So far they have not participated in the fight for the purchase of Isracard nor have they submitted offers for the purchase of Max.
The company estimates that the credit card companies are complex companies, and the terms of the transactions will allow the purchasing companies to generate a return on capital of 6%-7% after considering financing costs and additional expenses. This while the Phoenix currently generates a return on capital of 12-15%.
However, if they nevertheless come to the understanding in Phoenix that the purchase of Cal will allow it to generate a return on capital of 12% in the short term, it is not impossible that the insurance company will submit an offer to Discount Bank, which owns Cal.
At the same time, Israchart published on Tuesday an update to the voting form on the Harel proposal, ahead of the shareholders’ meeting that will be held on Monday. In the update, the company’s board of directors clarified that it does not prioritize Harel’s proposal over that of Menorah Mivathim, and the decision is up to the shareholders. The clarification was made following conversations held by representatives of the Real Estate Authority, in which it was explained that such a recommendation is problematic.
Half of the annual profit – in the fourth quarter
Meanwhile, Phoenix presented a total profit of NIS 1.1 billion in 2022, despite declines in the capital markets that characterized the past year and severely damaged the results of all insurance companies.
This is about a 50% decrease in profit compared to 2021, with the bulk of the decrease coming as a result of the difficult year in the capital markets, which resulted in a loss of NIS 238 million in the past year, compared to a profit of more than NIS 1 billion in 2021.
Phoenix ended the fourth quarter of 2022 with a total profit of NIS 526 million, reflecting a return on capital for the quarter of 23%. That is, half of the annual profit was recorded in the fourth quarter.
The profits were made possible thanks to a 43% growth in profit from insurance activities, an increase in the credit portfolio (both through the Gamma subsidiary and directly) to NIS 5 billion and an increase in income from the insurance agencies. These resulted in the fact that for the first time the company crossed the threshold of NIS 10 billion in equity.
The Israchart company stated: “Israchart rejects the claims outright. This is a desperate attempt to recycle baseless claims that have already been fully answered by us, and which raises concerns about the motives behind them.
“The fact that the plaintiff chose to spread the lawsuit to the media without bothering to present it to the company indicates that her filing is nothing more than a PR stunt.”