On March 9, Bank Hapoalim (TASE: POLI) will relinquish its remaining holding in credit card company Isracard, which it floated on the Tel Aviv Stock exchange in April last year. The bank, headed by Dov Kotler, announced yesterday evening that it would distribute its 33% holding in Isracard to its shareholders as a dividend in kind. Anyone owning Bank Hapoalim shares on March 5 will receive 0.04944 shares in Isracard for each Hapoalim share they hold.
The distribution will reduce Bank Hapoalim's capital by about NIS 820 million, causing a 0.17% fall in its capital adequacy ratio, but even after the distribution the ratio will remain a robust 11.7%. The bank decided not to wait for a strategic buyer who might perhaps pay a premium over the market value of Isracard's stock. It sees stock prices as being still high, despite yesterday's falls in the indices, and in any case no suitable buyer was found by Citi, which Hapoalim hired to find one. In any case, a sale to a strategic player would have added a direct, powerful competitor to the bank. As it stands, Isracard is a strong, independent player, but it does not have the backing of another financial body.
Bank Hapoalim was compelled to part with Isracard by legislation on competition in the financial sector. Last year, Bank Leumi (TASE: LUMI) sold its controlling holding in Leumi Card (which has since changed its trading name to Max) to Warburg Pincus and its minority partners Clal Insurance, Menorah Mivtachim, and Allied. Having become independent from the banks, both companies seek to expand in other areas of financial services, such as loans.
Now, the largest shareholder in Bank Hapoalim, and formerly its controlling shareholder, Shari Arison, will become a prominent shareholder in Isracard.
Isracard is the largest credit card company in Israel, with about 47% of the market, and annual turnover on its issued cards of over NIS 160 billion. In April 2019, Bank Hapoalim sold 65.2% of the company to the public for NIS 1.76 billion in total, giving the company a valuation of NIS 2.7 billion. Isracard's current market cap is NIS 2.55 billion. Bank Hapoalim's remaining holding is worth NIS 842 million.
Published by Globes, Israel business news - en.globes.co.il - on February 3, 2020
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