After the plunge in the share price of credit card company Isracard (TASE: ISCD) in the past few weeks, giving rise to assessments on the capital market that the sale of the company to insurance group Harel (TASE: HARL) would not go ahead, the two companies informed the Tel Aviv Stock Exchange this morning that they had extended the timetable for completing the deal. According to the joint announcement, the deadline for fulfilling all the preconditions for the deal, including obtaining approval from the Competition Authority, has been put back to December 31. Harel will be able to make a further extension, to January 31, 2024.
Two weeks ago, Isracard’s share price started to fall steeply, amid speculation on the market that the Competition Authority did not intend to approve the deal. Harel is due to buy Isracard at a valuation of NIS 3.3 billion. On October 18, Isracard’s market cap was around NIS 3 billion, but within a week it fell to NIS 2.34 billion, about NIS 1 billion below the valuation agreed with Harel. Last week, it looked as though the stock was recovering, among other things thanks to the fact that Harel did not announce any intention of seeking an adjustment to the acquisition price, but towards the end of the week it fell again, and the market cap at the end of the week was NIS 2.26 billion. This morning, following the two companies' announcement, Isracard's share price by around 15%.
The companies notified the stock exchange this morning that, if the Competition Commissioner’s approval is not received in accordance with the merger agreement, Harel will be entitled to inform Isracard of its wish to extend the deadline for fulfillment of the preconditions for a further period that it decides upon, up to January 31. Harel will not be able to request an adjustment to the price until after the agreed final deadline.
The additional extension is subject to approval by Isracard’s shareholders. The companies will ask the Competition Authority to allow more time for its decision.
In a letter to Harel Employees, Harel chairperson Yair Hamburger wrote, "We believe in the significant business potential of Isracard, and in our assessment that, over time, the deal will generate a good return for Harel on the equity invested and will diversify Harel’s business through the accession of a significant additional area of activity that will be a significant growth engine for the company." Referring to the war in the Gaza Strip, Hamburger wrote, "When the fighting dies down, we are certain in our belief that the Israeli economy with all its advantages and special qualities will be able to recover rapidly and even exceed its past achievements."
Published by Globes, Israel business news - en.globes.co.il - on November 5, 2023.
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