Treasury mulls Potash's Israel Chemicals bid

A Finance Ministry official told "Globes," "On the face of it, this deal has more advantages than risks, and should be considered."

Belying an official statement by Minister of Finance Yuval Steinitz's spokesman that the sale of Israel Chemicals Ltd. (TASE: ICL) to Potash Corporation of Saskatchewan Inc. (NYSE; TSX: POT) was not on the cards, top Ministry of Finance officials told "Globes" that they view a deal favorably.

"The Wall Street Journal" reported today, "The Israeli government would consider a formal request from Canada's Potash Corp. of Saskatchewan Inc. over increasing its stake in potash producer Israel Chemicals a spokesman for Israel's finance minister said late Saturday."

A top Ministry of Finance official told "Globes" today, "On the face of it, this deal has more economic advantages than risks, and it should be considered." Other officials cautioned, however, that matters were only at the preliminary stage, and that a deal would require a thorough examination.

"I reject the argument that 'such a deal is inconceivable.' Nothing is inconceivable. This deal will be considered because it can greatly benefit the economy and create huge economies of scale which will only benefit the economy," said the source, adding that if the takeover goes ahead, it would not happen overnight. "Such a deal involves bodies such as the Ministry of Defense, the Police, and the Antitrust Authority. However, this is not expected to be an obstacle to a deal."

The Ministry of Finance also rejects the argument that Potash Corporation would acquire Israel Chemicals in order to close it down or harm its production capacity, so that Potash Corporation could control the world's potash price. A ministry official said that the argument was "baseless," adding, "This cannot be done because it is not worthwhile doing given the amount of potash produced in Israel."

Ministry of Finance officials agree on two key issues: the irrelevance of the buyer's nationality, and that if a deal is closed and signed, the Israeli government will secure all its rights in an emergency.

"What does it matter if we're talking about a foreign or Israeli investor?" asked a top Ministry of Finance official. "What does the kind of investor matter, if we're talking about a financially sound strategic investor? By the way, in the past few weeks alone, we've seen foreign strategic investors enter Israel's cement industry and trying to enter its gas industry. What's the problem? Are the gas and cement industries less critical than the potash industry?|

The reference is to the acquisition of 50% of Clal Industries and Investments Ltd. (TASE: CII), which controls Nesher Cement Enterprises Ltd. by Len Blavatnik's Access Industries Inc., and the tender to bring in a strategic partner into the Leviathan natural gas field by Noble Energy Inc. (NYSE: NBL) and its Israeli partners Delek Group Ltd. (TASE: DLEKG), and Ratio Oil Exploration (1992) LP (TASE:RATI.L). Russia's Gazprom JSC (RTS: GAZP; LSE: GAZD; DAX: GAZ) and Australia's Woodside Petroleum Ltd. (ASX: WPL) are reportedly leading contenders in this tender.

In a notice to the TASE today, Israel Chemicals' parent company, Israel Corporation (TASE: ILCO) said, "Following the company's notice of October 31, 2012, and after obtaining explicit clarifications from the director general of the Ministry of Finance about contracts regarding the position of various government agencies about a deal, if and when there is one, the company confirms that what is stated in the abovementioned report is also correct at the time of this report. It is hereby made clear that the closing of the deal, if and when there is one, is subject to approval from various government ministries which own the golden share, as well as the approval of various regulators, including the Antitrust Authority and the Israel Tax Authority."

"The Wall Street Journal" today quotes a Ministry of Finance spokesman as saying, "When we will get a formal request, we will consider all the interests and a decision will be made in accordance." The statement reverses the Ministry of Finance's position from last Thursday, when it appeared to rule out a merger, saying it wasn't considering such a deal because of "professional reservations."

Published by Globes [online], Israel business news - www.globes-online.com - on November 4, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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