General Insurance hopes to complete the purchase of the Max credit card company by the end of the year, but today (Thursday) the company updated on a letter it received from the Commissioner of the Capital Markets, Insurance and Savings Authority, Moshe Barkat, in which he demands clarification regarding issues arising from the purchase deal, regarding to the terms that will apply as the company seeks to complete the transaction.
Among other things, Barkat demands clarifications regarding the aspects of the company’s financial stability and its commitment to Clal Insurance, as a derivative of the purchase deal. The commissioner demands that you commit to the mechanism for completing Clal Insurance’s equity, in accordance with the minimum threshold, including by carrying out actions to increase Clal Insurance’s equity while diluting the company’s holdings. The commissioner further explained that the proportion of equity in the total adjusted solo balance sheet of the company after the purchase transaction will not be less than 50% at any time.
We will remind you that last month Clal Insurance signed a binding agreement with the controlling owner of Max, the American investment fund Warburg Pincus (70%), to purchase the credit card company at a value of NIS 2.47 billion.
In general, we noted that as of today, the company meets all the relationship requirements that Barkat requires. In addition, this morning the company announced that it raised approximately NIS 500 million for the insurance company through Clal Bit, its bond raising company.
In addition to the capital financial requirements, the Capital Market Authority demands that Clal establish rules to safeguard the interests of Clal Insurance associates in their capacity as shareholders in WPI, the company established by the current controlling owner Warburg Pincus for the purpose of controlling Clal, in which Clal associates hold 9% of the shares. This, including the method of making a decision regarding joining the purchase transaction by the members’ investment committee and adding a “beneficial condition” to the consideration that will be paid to members of Clal Insurance who will sell their holdings in WPI. As far as the method of selling the partners’ investments is concerned, the issue itself is still under consideration by the Authority.
In addition, the authority’s letter includes an instruction according to which Clal must formulate and submit to the authority an outline for the termination
The activity of Max Insurance Agency, an insurance agency controlled by Max, and the cancellation of its license.
“The Authority announced that it is still examining a number of issues, including the legal implications that will be derived from the outline of the use of the control measures, as long as the transaction is implemented and the necessity of conditions for separating the business activities of Clal Insurance and Max”, they explained in general and noted that the company is studying the letter from the Commissioner and the meanings derived from it. The company also added that there is no certainty regarding the date of receiving the commissioner’s position in relation to the issues that were stated to be still under consideration and the content of such a position, and also that the completion of the transaction is subject to the existence of additional conditions stipulated in the purchase agreement and that there is no certainty regarding the company’s ability to complete the transaction or regarding the timing of its completion.