Memorandum signed: Clal Holdings will purchase MAX credit card company for NIS 2.47 billion

Clal Holdings announced to the stock exchange on Sunday evening the purchase of the MAX credit card company from the controlling owner, the Warburg Pincus Fund, for NIS 2.47 billion. The parties have already signed the memorandum of understanding in preparation for due diligence, and in the end they are expected to sign the agreement.
To the extent that the transaction is completed, Warburg Pincus will exit Max three years after acquiring control of it at a value of NIS 2.5 billion from Bank Leumi as part of the adoption of the recommendations of the Strum Committee, which stipulated that large credit companies should be separated from banks.
The value of the current transaction, NIS 2.47 billion, consists of a component of NIS 1.6 billion in cash, which the shareholders will receive, and NIS 870 million in a debt that Clal Holdings will assume.
Another company included in the deal is Max's subsidiary, Hyp, and it includes the payment solution companies Target Sarig, Caspit, Credit Guard and EasyCount, which offer advanced clearing services and options for debit credit remotely.
The resulting transaction consists of a cash transaction and a stock transaction. The share of Warberg Pincus in all holdings will reach up to 4.9%, which means that the shareholders are diluted by about 7%. Clal will finance the transaction through equity as well as financing from an external consortium led by Harel in the amount of NIS 875 million. In 2018, Warberg Pincus acquired Max from Bank Leumi for NIS 1.95 billion, which reflects an 11% return on the fund for its investment in Max.
The acquisition comes at a challenging stage for the company, as Alfred Akirov - the controlling owner of Alrov Real Estate, which owns 15% of Clal Insurance shares - is interested in acquiring control of the company. If he succeeds, he will acquire not only an insurance company but also a credit card company.
Clal Holdings previously owned a credit card company, but this move failed and the company closed its operations. "At the time, the company lacked the production floor required for the company's success in the field. Now, with the acquisition of Max, it appears that this is a more successful production floor," the insider noted. At this point Clal Holdings intends to retain Max's management team.
Clal Holdings estimates that it will be several months before a binding agreement is signed, and then several more months until they receive the necessary regulatory approvals from the Banking Supervision Authority and the Competition Authority. Market estimates are that the deal may add NIS 1.1 billion to Clal Insurance to its current market value.
"Clal Holdings is the fourth largest insurance company in the market, and Max is the third largest credit card company in the market, so the merger between the two creates a medium-sized financial company that can compete with banks - but still not close to their size," Clal insiders noted.
Yoram Naveh, CEO of the Clal Insurance and Finance Group, stated: Max, a quality company managed with great professionalism, which in recent years has built a diverse and growing financial platform.
"Today we join other moves that have already been made among institutional entities, which are becoming a significant factor in driving competition in the field of non-bank credit. Clal recently published its financial results for 2021, the best since its inception, and I am happy to publish the results." "Today, we present our intention to strengthen the holding company with a new and complementary arm, which will focus on non-bank credit and will be the group's next strategic leap."
Yaron Bloch, chairman of Max, said: "In light of the company's strong performance, in recent months various inquiries have been received from institutional and private entities interested in acquiring control of the company. We have chosen to focus on negotiations at the present time with the Clal Group due to the seriousness of its intentions, as reflected in the contacts between the parties and due to the strategic business fit for the Max Group.
"I believe that Max's connection to the Clal Group will promote competition in the credit market and payments market in Israel, and will allow the public to offer a wide and varied fan of valuable products and competitive prices. Max with its advanced capabilities and close relationship with customers, private and business, is an excellent platform "In the Israeli market. I am happy to sign the memorandum of understanding, and hope to complete the negotiations in favor of signing a binding agreement, and later receive the necessary approvals for the completion of the transaction in the coming months."