Claal Insurance Enterprise Holdings Ltd. on Monday announced the completion of its acquisition of Israeli credit card company Max from its controlling shareholder US private equity firm Warbus Pincus LLC in a deal worth NIS 2.47 billion ($687 million).
The deal, initially announced in August, which gives Clal Insurance a foothold in the Israeli credit market, will “boost competition in the consumer credit market,” Clal Insurance CEO Yoram Naveh said in a statement. Following the acquisition, Max will be integrated and operated as part of the Claal insurance and finance company.
“For the past year, we have been working with our partners on this complex transaction, and its completion today is a very significant milestone for the group,” said Naveh.
As part of the transaction, Claal will pay NIS 1.54 billion and assume that Max’s outstanding debt is NIS 800 million. Of this amount, Claal will immediately pay NIS 790 million in cash to Max shareholders in exchange for shares worth NIS 380 million on the date of completion of the deal. Another NIS 370 million will be paid no later than April 30, 2024.
Warburg Pincus has controlled Max since 2019, when it acquired it from Bank Leumi le-Israel Ltd., which was required to divest its credit card business as part of government policy aiming to spur competition in the credit and banking sector. It is hoped that the potential entry of a new non-bank player in the overly concentrated credit market will increase competition for households and small businesses and lower credit costs.
Max chairman Yaron Bloch said the purchase of the credit card company by the Clal group is a “natural and necessary development in the industry.”
It “will help enhance competition and expand value propositions for businesses and the consumer public in Israel,” said Bloch, senior adviser at Warburg Pincus in Israel. “The integration into a significant and leading financial group such as Claal will place Max in an excellent starting position for its continued growth and continued contribution to boost competition.”
Clal completed the acquisition after obtaining a permit from the Capital Markets, Insurance and Savings Authority on Monday, and after obtaining control permits from the Banking Supervision Department of the Bank of Israel and the Competition Authority in recent weeks. The Bank of Israel controls permit stipulations, among other things, that the minimum holding of Claal Insurance in Max will not be lower than 30%.
Max will continue to be supervised by the Banking Supervision Department at the Bank of Israel in order to ensure its stability and to maintain fair treatment of its customers, similar to the supervision of other banks and acquirers in Israel.
In another deal of insurance companies buying credit card companies MeMivtachim Holdings Ltd. and Harel Insurance Investments & Financial Services Ltd. have both made bids in recent weeks to buy Isracard, the country’s largest credit card company.
Earlier this year, Finance Minister Bezalel Smotrich announced that Israel Discount Bank Ltd., the nation’s fourth-largest lender, will need to divest its credit card business CAL.