Cal Receives $20M Payout Amid Acquisition Uncertainty

Cal, the Israeli credit card giant, has revealed a significant one-time payment of approximately 23 million shekels (around $6.2 million USD) from El Al. This financial infusion comes as part of the early termination of their long-standing partnership concerning the 'Fly Card' frequent flyer program, which has now transitioned to competitor Isracard. The payout, recognized in Cal's second-quarter financial reports, addresses marketing grants previously provided by El Al.

Further bolstering Cal's financial position, the company is set to receive an additional 52 million shekels (approximately $14 million USD) in royalties. This sum represents ongoing operational fees for managing the Fly Card credit cards until the end of the year. Cumulatively, these payments from El Al total around 75 million shekels (nearly $20 million USD), offering a financial cushion as Cal navigates a critical period of transition.

The credit card issuer is currently awaiting a pivotal decision from the Israel Competition Authority regarding its proposed acquisition by Union Group, led by the Horesh family, in conjunction with the insurance firm Harel. This regulatory review, which has seen multiple extensions since February, is expected to conclude imminently, with a decision anticipated by Sunday. The potential acquisition, initially agreed upon a year ago, has faced delays, likely due to complex regulatory hurdles, particularly concerning potential market concentration given Union Group's existing stake in Super-Pharm and Cal's operations with Be, a pharmacy chain owned by Shufersal.

Cal's financial performance in the second quarter showed resilience, with net profit rising approximately 4% to 104 million shekels, excluding a one-time provision from the prior year. However, when factoring in the El Al payment, the underlying profit saw a decline of 19% compared to the same period last year. Revenue for the quarter reached nearly 843 million shekels, a 6.5% increase year-over-year, driven by growth in credit card activity and lending.

The company's consumer credit portfolio expanded by 11.9% to 9.3 billion shekels, marking the ninth consecutive quarter of growth. Notably, auto lending has surpassed the 1 billion shekel threshold for the first time. Despite this expansion, credit loss expenses rose by 21% to 60 million shekels, attributed by Cal primarily to the portfolio's growth.

In a strategic move to counter the loss of the Fly Card program, Cal launched the FlyAll travel club in partnership with Issta. This new venture has rapidly attracted over 130,000 members within two months, demonstrating Cal's agility in adapting to market shifts and developing new customer engagement strategies. The company also announced extended partnerships with major financial institutions like Bank Hapoalim and Mizrahi Tefahot, alongside new agreements with employee benefit clubs and direct insurers.

This period of financial reporting coincides with significant leadership changes at Cal. The departure of two deputy CEOs, Odelia Moshe Ostrovsky and Liat Kessler, signals a broader executive reshuffling, with new appointments expected to bring fresh perspectives to the company's strategic direction amidst the ongoing acquisition process and evolving market dynamics.