Clal Insurance commits to buying credit card co Max

Last Thursday, the Clal Insurance Enterprises Holdings (TASE: CLIS) board approved the deal for the acquisition of credit card company Max, and on Friday evening the company signed a binding agreement with the controlling shareholder in Max, US private equity firm Warburg Pincus (70%). The agreement almost finally determines the sale of Max at a valuation of NIS 2.47 billion, and the transaction is expected to close towards the end of the year.

The deal now goes for final approval by the three regulators concerned: the Capital Markets, Insurance and Savings Authority, which supervises Clal Insurance; the Banking Supervision Department of the Bank of Israel, which supervises Max; and the Competition Authority. Clal Insurance has said all along that it has no intention of signing an agreement that will put it into conflict with the regulators, so it would seem that no obstacle to completion of the deal is expected from that quarter.

The acquisition agreement states that the parties will work towards the completion of preliminary checks by the Capital Markets, Insurance and Savings Authority within 30 days, and that in this period Warburg Pincus will act to obtain the signatures of the other sellers, Menorah Mivtachim and Allied, on the sale agreement. Each of the sides can refuse to complete the deal if these provisions are not fulfilled to its satisfaction.

Clal Insurance will have to pay NIS 1.6 billion. The remaining NIS 880 million of the consideration is debt that will be transferred to Clal. Clal Insurance raised NIS 500 million in January, while NIS 424 million will be in Clal Insurance shares. Clal Insurance says that the share component for Warburg Pincus will be such that the US firm will not have a stake in it of more than 4.99%.

The signing of the deal represents an achievement for Clal Insurance CEO Yoram Naveh, who insisted on carrying out the deal despite the fact that many capital market players thought that the price was too high, and despite the opposition to it from Clal Insurance’s largest shareholder, Alrov Properties and Lodgings (TASE: ALPR), controlled by Alfred Akirov.

Naveh and Clal Insurance chairperson Haim Samet managed to convince the directors that the deal was a good one for the company. They have argued all along that the credit card company has high growth potential that the market is not exposed to because, as a privately held company, Max does not release full financial reports.

“This deal will strengthen the Max group and enable it to be a significant player that encourages competition in the non-bank credit sector,” Naveh said. “In recent years, Max has built a varied and growing financial platform, and it will be an additional growth engine, alongside continued development of the Clal Group’s core activity in insurance and finance.”

Published by Globes, Israel business news – en.globes.co.il – on August 14, 2022.

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