Delek Group turns up pressure on Isracard board

Yitzhak Tshuva's Delek Group has made a revised bid for Isracard at a higher valuation, presenting the credit card company's board with a dilemma.

Delek Group, controlled by Yitzhak Tshuva, is turning up the pressure on the board of directors of credit card company Isracard, to encourage the board to accept its takeover offer for the company. Delek Group now seeks to take over Isracard at a valuation of NIS 3.56 billion, NIS 200 million more than its previous offer.

The Isracard board is examining other offers, one at a valuation of NIS 3.15 billion from insurance company Menora Mivtachim, and a share-swap proposal from Bank of Jerusalem at an estimated valuation of NIS 3.2-3.4 billion. The board, chaired by Tamar Yassur, has deferred the date of the shareholders meeting, which had already been deferred once to consider the Bank of Jerusalem offer, to the middle of next month.

Isracard signed an agreement with Menora Mivtachim in late October. At the time, Menora Mivtachim’s offer seemed to be the only serious one around. In mid-December, a week before the shareholders were due to meet, Delek Group, headed by Idan Wallace, and Bank of Jerusalem, headed by Yair Kaplan and controlled by the Shoval family, made surprise bids, and the race was reopened.

Isracard committed to paying a penalty of NIS 72 million to Menora Mivtachim in the event that it did not proceed with the agreement with it and chose another offer.

Wallace is conducting the takeover battle for Isracard determinedly. Delek Group’s bid is his initiative, and embodies a desire to diversify the group’s activity outside the energy business. Wallace filed an application with the Bank of Israel in June, and he has built the takeover move carefully over the past few months, and has no intention of retreating. It would seem that this is why Delek Group’s new offer is NIS 200 million higher.

Delek Group’s revised bid is at a valuation higher than that of Menora Mivtachim (NIS 3.56 billion versus NIS 3.15 billion), but the company will participate only partially in the penalty. Delek Group is offering to deposit NIS 72 million with Isracard, half of which will be forfeit to Menora Mivtachim if the deal with it does not go ahead.

The risk faced by the Isracard board is regulatory. If it proceeds with a deal with Delek Group and, in the end, the Bank of Israel does not give the latter a permit to hold the controlling interest in Isracard, it will lose out both ways, and will pay a penalty (now reduced) of NIS 36 million. But if the deal with Menora Mivtachim goes ahead at a valuation lower than that in Delek Group’s offer, the Isracard directors will be exposed to lawsuits by the shareholders, who will claim that they did not maximize the company’s value. Menora Mivtachim’s bid also carries regulatory risk, in that the Competition Authority might not allow it to take over a credit company because of the harm to competition (as happened in the case of Harel’s attempt to take over Isracard last year).

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Then there is the offer by Bank of Jerusalem, which ought not to be problematic as far as the Competition Authority is concerned. Bank of Jerusalem, however, wants to take over Isracard (100%) through a complicated share swap deal that requires in depth analysis, and the valuation that it gives Isracard, at NIS 3.2-3.4 billion, has been overtaken by Delek Group.

Published by Globes, Israel business news - en.globes.co.il - on December 25, 2024.

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