The Competition Authority has expressed official opposition to the deal whereby Harel Insurance Investments and Financial Services (TASE: HARL) is due to acquire credit card company Isracard (TASE: ISCD) for NIS 3 billion. The Authority has notified both companies that its recommendation to the Exemptions and Mergers Committee will be that the merger should not be allowed. The Capital Markets, Insurance and Savings Authority and the Bank of Israel have approved the deal.
Harel said that it was examining the implications of the Competition Authority’s objection to the merger. "The company’s board of directors will discuss the matter and decide whether the company should exercise its authority to extend the final deadline for fulfilment of the preconditions for the merger, for the purposes of filing an appeal against the Competition Authority’s decision," the company stated. Extension of the deadline will be subject to approval by the Isracard shareholders.
Harel believes that, despite the Competition Authority’s objections, the deal is not yet lost. The Exemptions and Mergers Committee has not yet convened to discuss it, and the two companies are placing their hopes in the fact that a similar merger, when Clal Insurance bought credit card company Max, was approved. Moreover, the merger between Union Bank of Israel and Mizrahi Tefahot Bank was ultimately approved despite the objections of then Competition Authority director Michal Halperin.
Two main fears
All along, the Competition Authority has expressed two main fears about the deal. The first relates to Harel’s dominance in health insurance, where it has a 37% market share, while Isracard, as a credit card issuer, holds details on millions of customers. The Competition Authority wants to ensure that these data will not grant the merged company an unfair advantage in the health insurance market.
The second issue is connected to Max, which, as mentioned, was acquired by Clal Insurance with the Competition Authority’s approval. The Competition Authority has expressed concern over the "Max loan", a loan of NIS 900 million that companies in the Harel group awarded US-based private equity firm Warburg Pincus for the purposes of buying Max in 2019. The loan is secured on Max shares, and was transferred to Clal Insurance when it bought Max from Warburg Pincus last year.
The Commissioner of Capital Markets, Insurance and Savings imposed determined that restrictions would apply to the Harel group companies in respect of the loan after the acquisition of Isracard, if the deal was completed. The Competition Authority fears that Isracard will in effect be a creditor of its competitor Max.
Clal Insurance has, however, already repaid the loan to Harel, after raising cash in a bond offering for that purpose, which among other things enabled it to reduce the interest rate on the debt.
Published by Globes, Israel business news - en.globes.co.il - on January 23, 2024.
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