Israeli insurer Clal Insurance’s parent is set to acquire credit card firm Max from US-based private equity firm Warburg Pincus and its partners for NIS2.47 billion ($770 million).
Clal group chief executive officer Yoram Naveh said the two sides have signed a memorandum of understanding that will lead to further negotiations toward a binding agreement.
If the deal goes through, it would mark a quick exit for Warburg Pincus. The US-based private equity firm had in February 2019 bought credit card company Leumi Card from Bank Leumi and the Azrieli group, and renamed it Max.
The latest deal, if completed, will be subject to regulatory approvals from the Bank of Israel and the country’s competition watchdog. Following the deal, Max will become a subsidiary of the holding company Clal Insurance Enterprises Holdings, alongside Clal Insurance.
The deal will be structured such that the net consideration for Clal would be NIS1.6 billion while the remaining amount will be paid via structured financing. As part of the deal, Max shareholders will be paid 30% of the consideration in shares of Clal Insurance Enterprises.
A couple of months ago, the Israeli insurer had raised NIS500 million via an equity offering. Some of that money will also go towards funding the deal.
Local media reports said Warburg Pincus will not become a party at interest in Clal Insurance, and will hold a 4.99% stake in it at most. Alongside Warburg Pincus, which holds 70% of Max, Clal itself is the second-largest shareholder together with Menorah Mivtachim, with 9% each. Allied Group holds 5%, and the remaining shares are held by the employees and various consultants.
Clal said the deal will help it diversify its revenue and boost its credit business, as several of its competitors in the insurance business are already in the card business.