The on again-off again sale of Israel Corp.'s 26% stake in Israel Oil Refineries (Bazan) to the government is back on after the two sides agreed to a price of more than NIS 570m. for the holding.
Israel Corp., which is owned by the Ofer brothers, said on Thursday that, before the deal was closed, Bazan would pay out a $100m. dividend. Israel Corp. would receive $26m and the government the rest in respect of its 74% stake in Bazan.
The sale price was based on the average value of two appraisals that took place in June 2003 and is linked to the consumer price index, beginning from July 1, 2003. Israel Corp. also would receive interest on the sale price of 6% a year, starting from the same date. A source close to the deal said the final amount would work out to about NIS 650m.
The transaction is due to close 90 days after the deal is signed, which will take place once all the necessary government approvals have been received.
Israel Corp.'s acceptance of the deal comes just six weeks after it backed out of an agreement to sell the stake for a similar amount. The company blamed the Treasury's "two and half a years of fickle behavior" for its decision, saying that the government had gone back on two previous deals and had failed to fulfill the commitments it made in the agreement that was struck in June.
There was speculation that Israel Corp. had withdrawn from the deal because the sale price was too low, especially given that Bazan's income has surged following a rise in oil prices. In the second quarter, net profit jumped to NIS 400m. from NIS 270m. in the same period a year earlier and revenue rose to NIS 6.8 billion from NIS 4.29b.
Even now, the agreement could hit a snag, as Israel Corp. has the right to take legal action over the price.
"The two sides have agreed that the company has the right to take any legal action it feels proper in connection with the amount it is receiving for its stake in Bazan," Israel Corp. said.
The deal also could be blocked by the Supreme Court, which is considering a petition from the Movement for Quality Government to make Israel Corp. hand over its stake for free. The organization argues that under the terms with which Israel Corp. holds the stake (based on a licensing agreement from 1933) the holding should have passed to the state in 2003.
The ongoing hearing was supposed to reconvene on Sunday but has been postponed at the request of the government, a spokesman for the Movement for Quality Government said. A new date has not been set.
If the deal does go ahead, it will pave the way for the full privatization of Bazan, as it will give the government full ownership of the company and allow it to carry out its plan of separately selling the monopoly's refineries in Ashdod and Haifa to encourage competition.
The Ashdod refinery would be sold to a private concern after which the remaining company and its Haifa refinery would be sold through an initial public offering on the Tel Aviv Stock Exchange or to a private group.
To prevent concentration in the sector, the large fuel companies would not be allowed to bid for the Haifa refinery but would be allowed to bid for the Ashdod plant - a decision backed by outgoing anti-trust commissioner Dror Strum. Israel Corp. has said in the past it would be interested in taking part in the privatization, as has Alon Oil Group.