What is the right price tag for Isracard (TASE: ISCD)? The listed credit card company had a market cap before this morning’s opening of NIS 2.75 billion. Yesterday, insurance company Menora Mivtachim (TASE: MMHD) made an offer to Isracard’s management on the basis of a NIS 3.1 billion valuation, 15% more than Isracard’s market cap before Menora Mivtachim entered into renewed negotiations on taking it over. Isracard’s share price has risen by nearly 2% today, while Menora Mivtachim’s share price is down by just over 1%.
The bid is lower than the one made by insurance company Harel (TASE: HARL) for Isracard a year ago, of NIS 3.3 billion, and Menora Mivtachim itself sought to take it over at a valuation of NIS 3.5 billion. The Competition Authority ruled out Harel’s bid, and negotiations are now being renewed at a lower valuation.
The bid comes after Menora Mivtachim conducted negotiations with investment bank Value Base, which is representing Isracard. Why the lower valuation? The explanation is apparently the war and the substantially worse position of the economy than a year ago. The deal is therefore less attractive for Isracard’s shareholders, and they could of course reject it.
Menora Mivtachim proposes to invest in Isracard through a private placement of shares that, as mentioned, will embody a valuation of NIS 3.1 billion. Immediately after the placement, Menora Mivtachim will hold 32% of the shares in Isracard, which will represent a controlling interest. According to Menora Mivtachim’s letter to Isracard, the valuation reflects a premium of 20% on its closing price on August 29, when it first made its approach, and a similar premium on Isracard’s average price in the 60 days before the bid.
Wesure Global Tech (TASE: WESR) , which holds insurance company Ayalon and digital insurance company WeSure, also seeks to acquire Isracard. Wed have also reported that additional parties are interested in the company, among them Benny Alagem and a group of Israeli retailers.
As part of the deal with Menora Mivtachim, Isracard will first distribute a dividend of NIS 700 million. This will cut Isracard’s valuation to about NIS 2.1 billion (on the basis of its current market cap). Menora Mivtachim will then inject the sum of its investment (almost NIS 1 billion) in exchange for the allocation of shares amounting to 32% of the company. Isracard’s shareholders gain from the dividend, and from the fact that the company’s value will then grow. This is a kind of sweetener for the existing shareholders, but Menora Mivtachim will also have to obtain regulatory approval for the deal, which is not a foregone conclusion.
Menora Mivtachim says that, after analyzing the grounds for the Competition Authority’s quashing of the deal with Harel, it believes that there is "a high degree of certainty" that the deal will be completed, "among other things because of the structure of Menora Mivtachim’s insurance portfolio."
Published by Globes, Israel business news - en.globes.co.il - on October 10, 2024.
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