Blue Square Israel (NYSE: BSI; TASE: BSI) announced today that it has entered into an agreement in which it, together with Dor Alon Energy (1988) Ltd., will purchase from Credit Cards for Israel Ltd. (CAL) 49% of the shares of capital stock of Diners Club Israel Ltd. for a total consideration of NIS 21.3 million. Diners Israel is a subsidiary of CAL.
The purchased shares will be allocated 36.75% to Blue Square and 12.25% to Dor Alon; ICC-CAL will still own 51%. The purchase will be funded through a loan to be granted by CAL to Blue Square and Dor Alon.
Blue Square-Israel has also entered into an agreement with Dor Alon establishing a joint customers club for the benefit of Blue Square and Dor Alon customers, to be formed as a partnership to be held 75% by Blue Square and 25% by Dor Alon.
The customer club will offer its members a credit card issued by Diners Israel, which will provide services to the customer club and its members.
ICC-CAL CEO Boaz Chechik said the sale was due to the revolution in Israel’s credit card market. He said credit card issuing and clearance turnover would exceed NIS 110 billion this year, reflecting a forecast of 10% growth. The main factor in the revolution was the increase in the number of consumers using credit card companies instead of banks for financial activities, such as rescheduling debts or obtaining financing, and who view credit cards as an additional source of available credit, managed separately from their bank accounts.
For Diners Club Israel, the purpose of the sale is to recruit more non-bank customers from Dor Alon customers. “Credit card companies were another arm of the banks. We set ourselves the goal of recruiting customers through additional non-bank distribution channels,” said Chechik.
Figures presented by Chechik showed that ICC-CAL had 340,000 non-bank customers, one third of its total customers. It sells 12,000 new credit products a month, and issued 55,000 active non-bank credit cards in the past six months. The amount of available credit for non-bank customers is currently NIS 500 million.
For Dor Alon, the acquisition of Diners Club Israel is part of its strategic plan to include financial services in its broad retail platform. Alon USA Energy Inc. (NYSE:ALJ) issues Fina credit cards to its retail customers.
Dor Alon CEO David Weissman said there was no plan at this stage to set up bank branches at retail sails points. The plan, in cooperation with Diners Club Israel, is to set up smart ATMs at sales points where extensive financial transactions could be carried out.
Dor Alon retail chains include Blue Square, Kfar HaShaashuim, Dor Alon Fuel Stations Operations Ltd., Alonit, and Super Alonit. Dor Alon also owns the Israeli franchises for Kentucky Fried Chicken, Pizza Hut, and Segafredo Zanetti Espresso. These chains have over 550 sales points visited by over 100 million customers. Dor Alon’s retail turnover is over NIS 17 billion, including NIS 10 billion in Israel.
Diners Club Israel has issued 230,000 credit cards to date, and has turnover of NIS 3 billion a year. According to ICC-CAL, 70% of businesses in Israel honor Diners Club credit cards, and the number of credit cards issued has been growing by 25% a year in recent years.
Published by Globes [online], Israel business news - www.globes.co.il - on Tuesday, November 29, 2005