Blue Square Real Estate Ltd.

M&A Activity • Dec 31, 2025

2025-12-31

Blue Square Real Estate Ltd.

To: To:

Israel Securities Authority Tel Aviv Stock Exchange Ltd.

Via MAGNA Via MAGNA

Subject: Immediate report regarding the merger of a wholly owned (indirectly) subsidiary of the company into and with the company

Blue Square Real Estate Ltd. (hereinafter and above: Blue Square Real Estate or the Company or the Absorbing Company) and Kanyon Ha'Ir Tel Aviv Ltd., C.R. 514434349 (hereinafter: the Target Company) are pleased to hereby submit an immediate report in accordance with the provisions of Chapter G1 of the Securities Regulations (Periodic and Immediate Reports), 1970 (hereinafter: the Regulations), regarding a merger, within which the Target Company will be merged into and with the Absorbing Company (hereinafter: the Merger or the Merger Transaction), as detailed below:

1.

Names of the parties to the merger agreement

1.1.

Blue Square Real Estate Ltd. - the Absorbing Company as this term is dened in the Companies Law, 1999 (hereinafter: the Companies Law).

1.2.

Kanyon Ha'Ir Tel Aviv Ltd. - the Target Company as this term is dened in the Companies Law (hereinafter: the Target Company).

1.3.

Migdaley Lev Tel Aviv Ltd. - a company expected to merge into and with the Target Company, concurrently with the merger according to this report, in consideration for shares of the Target Company that will be allocated to Blue Square Real Estate Shuk TA Residential Ltd., which is the sole shareholder of Migdaley Lev Tel Aviv Ltd. (hereinafter: the First Merger).

1.4.

Blue Square Real Estate Shuk TA Commercial Ltd. - a company that is wholly owned (100%) by the Company (indirectly) holding 100% of the issued and paid-up share capital of the Target Company, and after the First Merger is expected to hold the Target Company together with Shuk TA Residential Company (hereinafter: Shuk TA Commercial Company).

1.5.

Blue Square Real Estate Shuk TA Ltd. - holds 100% of the issued and paid-up share capital of Shuk TA Commercial Company, and is wholly owned (100%) by the Company (hereinafter: Shuk TA Company).

1.6.

Blue Square Real Estate Shuk TA Residential Ltd. - a company wholly owned (100%) by the Company (indirectly), does not hold any of the issued and paid-up share capital of the Target Company, and after the First Merger is expected to hold the Target Company together with Shuk TA Commercial Company, and is a wholly owned company (indirectly) of the Company (above and hereinafter: Shuk TA Residential Company).

1.7.

Blue Square Residential Ltd. - holds 100% of the issued and paid-up share capital of Shuk TA Residential Company, and is a company wholly owned (100%) by the Company (hereinafter: the Residential Company).

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2. Key Points of the Merger Agreement

• 2.1. The merger is part of an internal restructuring process in the company, regarding all companies mentioned in section 1 above. The restructuring steps, which shall take place sequentially, one after another, on the same day and at the same time, are detailed below:
• 2.1.1 First stage: Migdaley Lev Tel Aviv Ltd. will be merged with and into the Target Company in a merger in which Migdaley Lev Tel Aviv Ltd. will transfer all of its assets and liabilities to the Target Company, upon its dissolution without liquidation, in exchange for the issuance of shares of the Target Company to the sole shareholder of Migdaley Lev Tel Aviv Ltd. (hereinafter: the rst stage of the restructuring).
• 2.1.2 Second stage: The Target Company intends to merge with and into the Company in a merger under which

the Target Company will transfer all its assets and liabilities to the Company, upon its dissolution without liquidation, in exchange for the allocation of ordinary shares of the Company (hereinafter: the allocated shares) to the shareholders of the Target Company, according to their holdings in the Target Company (hereinafter: the second stage of the restructuring and/or the second merger). It is noted that the allocated shares at the second stage shall, upon allocation, be considered semi-dormant shares (thus, they will not grant voting rights) in accordance with Section 309(b) of the Companies Law.

2.1.3 Third stage: Tel Aviv Stock Exchange Commerce Company (Shuk TA Maschar) intends to distribute as a dividend in kind its portion in the allocated shares to Tel Aviv Stock Exchange (Shuk TA) (hereinafter: the third stage of the restructuring). ¹

in the allocated shares to Tel Aviv Stock Exchange (Shuk TA) (hereinafter: the third stage of the restructuring). ¹

2.1.4 Fourth stage: Tel Aviv Stock Exchange (Shuk TA) intends to distribute as a dividend in kind its portion in the

allocated shares to the Company (hereinafter: the fourth stage of the restructuring).

2.1.5 Fifth stage: Tel Aviv Residential Company (Shuk TA Megurim) intends to distribute as a dividend in kind its

portion in the allocated shares to the Residential Company (hereinafter: the fth stage of the restructuring).

2.1.6 Sixth stage: The Residential Company (Havrat HaMigurim) intends to distribute as a dividend in kind its

portion in the allocated shares to the Company (hereinafter: the sixth stage of the restructuring).

After completion of the sixth stage, the allocated shares held by the Company shall be dormant, and the Company will consider acting to cancel them shortly after their receipt and at the same time as the completion of the other restructuring stages, in accordance with Section 308(a) of the Companies Law.

The six stages of the restructuring will hereinafter be jointly referred to as the restructuring.

¹ It should be noted that, with respect to the execution of the third, fourth, and fth stages of the restructuring, the companies participating in the restructuring have requested court approval for a capital reduction in accordance with the provisions of Section 303 of the Companies Law.

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• 2.2. Three days after the fulllment of the suspensive conditions² (as dened in section 7 below) (hereinafter: the "Merger Closing Date"), the following shall apply, with these actions deemed to have retroactive effect as of December 31, 2025:
• 2.2.1. All the business activity, assets, liabilities, licenses, permits, and agreements of the Target Company, including future, conditional, known, and unknown charges, of any kind whatsoever, shall be transferred and assigned to the Absorbing Company, and this shall be in the state of the assets and charges at the time of transfer, As-Is.

The Absorbing Company shall be regarded as if it were the Target Company in all legal proceedings, including enforcement proceedings.

• 2.2.2. The Target Company's assets pledged to third parties shall be transferred to the Absorbing Company subject to the pledge on them, including registration of such a pledge in the Absorbing Company's register of pledges by the Companies Registrar. The Target Company's assets registered in legal registries shall be transferred to the Absorbing Company, with the parties effecting a change of registration to the name of the Absorbing Company.
• 2.2.3. Subject to applicable law, the employees of the Target Company shall cease to be employees of the Target Company and shall become employees of the Absorbing Company. The Absorbing Company shall assume, as of the Merger Closing Date, all existing rights of the Target Company employees in funds and/or pension funds and/or under nancial or other arrangements, and all provisions, reserves, and allowances transferred for these employees shall be recorded in its books. The employees shall transfer to the Absorbing Company while maintaining ongoing rights with respect to seniority-related benets and concerning accrued vacation and sick days.
• 2.2.4. After the completion of the merger, the Target Company shall be dissolved without liquidation, and its name shall be removed from the Companies Registrar records as specied in section 323 of the Companies Law.

3. Tax Implications of the Merger on the Absorbing Company

3.1. The merger is expected to be executed as a tax-exempt transaction, subject to the provisions of sections 103B and 104G of the Ordinance, in accordance with a tax ruling from the Israel Tax Authority received by the company on December 16, 2025:

A. The merger meets the conditions of section 103G of the Ordinance and the regulations promulgated thereunder and shall be carried out as a tax-exempt transaction in accordance with section 103B of the Ordinance;

² The nal date for the fulllment of the suspensive conditions is May 1, 2026, with the possibility to extend this date according to the terms set in the merger agreement, all subject to the provisions of the tax ruling.

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• b. The transfer of shares of the Target Company to its sole (indirect) shareholder, the Absorbing Company, complies with the conditions of Section 104G of the Ordinance and the regulations enacted thereunder, and will be carried out with a tax exemption according to Section 104G of the Ordinance; 104G of the Ordinance;
• c. The transfer of the Target Company employees' funds to the Absorbing Company.
• 1. The quantity and percentage of holdings by interested parties in the absorbing company, in the issued and paid-up capital and in voting rights
• 4.1. Before the merger: The holdings of interested parties in the absorbing company, in the issued and paid-up capital and in voting rights of the absorbing company (including full dilution), are as specied in the report on interested party holdings in the absorbing company, dated 20 October 2025 (reference number: 2025-01- 077893).
• 4.2. After the merger: In consideration that the merger process includes the allocation of the company's shares to companies fully owned by the company (directly or indirectly), which, according to the Companies Law, are not entitled to voting rights, and considering that upon completion of the merger the shares will be returned to the company and become dormant or cancelled as required by law, it follows that, as a result of the merger, there will be no effective change in the voting and participation rights of interested parties in the company (except for the temporary holding of shares by a subsidiary of the company, which does not grant voting rights, until the process is completed and the shares become dormant or are cancelled – if the shares are cancelled, there will also be no change in the company's issued and paid-up capital).
• 4.3. As of the date of this report, the company does not have any securities convertible or exercisable into the company's shares.

5. Merger Consideration

As consideration for the merger, the Target Company will allocate the allotted shares to Shuk TA Maschar Company and to Shuk TA Megurim Company. The number of allotted shares will be determined at the completion of the merger as a function of the value of the Target Company (after completion of the rst merger) divided by the closing price of all the company's shares on 31 December 2025.

It should be noted that shortly before the completion of the merger (as dened above), the company will publish a report regarding a non-material private offering in accordance with the Securities Regulations (Private Offering of Securities by a Registered Company), 2000, which will detail, among other things, the number of allotted company shares.

• 1. The position of the Board of Directors regarding whether there is a reasonable concern that, as a result of the merger, the absorbing company will not be able to meet its obligations to its creditors after the merger The board of directors of each of the merging companies approved the merger, determining, in view of the nancial status of the merging companies and with respect to the solvency of the absorbing company after the completion of the merger, that there is no reasonable concern that due to the merger, the absorbing company will not be able to meet its obligations to its creditors.
• 1. Approvals required for the merger or conditions set for its execution
• 7.1. In accordance with Section 320 of the Companies Law, the approval of the board of directors of the merging companies is required for the merger, and the approval of the general meeting is not required, provided that all the conditions listed in Section 320 of the Companies Law are met.

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• 7.2. Completion of the merger is subject to the cumulative fulllment of the suspensive conditions detailed in the merger agreement, including the following conditions (hereinafter: the suspensive conditions):
• 7.2.1. Receipt of approval from the Tax Authority (ruling). The company received the approval from the Tax Authority on December 14, 2025, and is acting in accordance with the provisions and instructions contained within it.
• 7.2.2. Receipt of any approval regarding the merger required (if so required) by law, including under permits, licenses or approvals granted to either of the companies by authorized, governmental, local, or other authorities and/or third parties, in connection with their businesses or assets, and including completion of land registration and parcelization procedures – not yet received.
• 7.2.3. Delivery of various notices and documents to relevant third parties, as required by law and agreement – not yet received.
• 7.2.4. Receipt of the approval of the Board of Directors of each of the parties to the merger agreement, to its approval and execution – fullled on December 30, 2025.
• 7.2.5. Receipt of court approval to execute a capital reduction according to the provisions of section 303 of the Companies Law regarding execution of the third, fourth, and fth stages of the structural change. The relevant companies have submitted such requests to the court, but its approval has not yet been received.
• 7.2.6. Completion of allocation of company shares as detailed in the second stage of the structural change – not yet completed.
• 7.2.7. Receipt of approval from the Israel Securities Authority for the required disclosure framework regarding the merger. The company received the approval from the Israel Securities Authority on November 26, 2025, and is acting in accordance with the provisions and instructions contained within it.
• 7.2.8. No restraining order of a competent court is in effect preventing completion of the merger.
• 1. Existing or expected new restrictions that will apply to the absorbing company following the merger

No new, existing, or expected restrictions are expected to apply to the absorbing company as a result of the merger, except for restrictions on the offsetting of losses for tax purposes in accordance with the provisions of section 103 of the Income Tax Ordinance (New Version) 1961 and the provisions of the tax ruling.

1. Absence of personal interest in the merger

To the best knowledge of the absorbing company, the controlling shareholder, directors, and interested parties in the absorbing company do not have a personal interest in the merger.

1. Approval of the merger according to section 320(c) or (d) of the Companies Law

The merger does not require approval under section 320(c) or (d) of the Companies Law.

1. The absorbing company's plans, if any, regarding securities that are convertible or exercisable into shares of the target company

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The target company has not issued nor undertaken to issue any securities that are convertible into or exercisable for its shares.

12. The merger is not material

12.1.

In the company's view, the merger is not a material merger, even though according to the quantitative criteria set out in Regulation 37g(1) of the Securities Regulations (Periodic and Immediate Reports), 1970, there is ostensibly a presumption that it is material. This is, among other reasons, for the following arguments:

A. The merger is a merger between a public company and a target company that is a private company wholly owned (indirectly), whose results are consolidated in the consolidated nancial statements of the company,

and therefore the operations of the company after the merger are in any event reected in its consolidated nancial statements,

and accordingly, the merger does not have a material impact on the company's consolidated nancial statements,

before and after the merger, and publishing a report in the format of a material merger would not provide new information to the investor in the company's securities;

• B. The merger is not subject to the approval of the general meetings of the company and of the target company;
• C. The merger does not and will not have an impact on the company's assets or liabilities in its consolidated nancial statements,

and will not affect the company's ability to meet all its obligations, including

its obligations to holders of bonds and commercial papers issued by the company;

12.2.

On November 26, 2025, an approval was received from the Israel Securities Authority not to intervene in the company's position that this is a non-material merger.

This is a merger that is not material.

13. The main reasons of the board of directors for approving the merger

A. The merger is intended to streamline the group's structure, reduce operating costs, and create synergy between elds of activity,

while improving the capital structure and increasing managerial eciency.

B. There is no reasonable concern that as a result of the merger the company will not be able to meet its obligations to its creditors,

after the completion of the merger.

Respectfully,

Blue Square Real Estate Ltd.

By Mr. Arthur Leshinsky, CEO