Sharp criticism is being leveled against Minister of Finance Yuval Steinitz by the Ministry of Finance and the Prime Minister's Bureau after the ministry's hasty, astonishing, and inaccurate announcement about Israel Chemicals Ltd. (TASE: ICL) and Potash Corporation of Saskatchewan Inc. (NYSE; TSX: POT). "The issue of a possible merger between Israel Chemicals and Canada's Potash Corporation is not on the agenda at this time, since there are professional reservations by the Ministry of Finance," said Steinitz's bureau in a statement at 9 pm on Thursday.
Steinitz realized that he was in trouble the next day. He realized that not only had the Ministry of Finance not drawn up any professional reservations, and that ministry officials had not yet received an answer to their request for clarifications nor had they discussed the unofficial approach made to them on Tuesday. Steinitz had the unpleasant surprise of learning that Prime Minister Benjamin Netanyahu was actually encouraging the entry of large multinationals in to Israel, which fit his message of the soundness of the Israeli economy.
In practice, the Prime Minister's Office and the Ministry of Finance are ignoring Steinitz's statement, since it is believed that there is little chance that he - the minister who declared 2012 as the year of foreign investment in Israel and called on foreign companies to become strategic partners in the Israeli economy - will be the finance minister who will deal with a merger of the two companies. Furthermore, there has been no official request about a possible merger either to the Ministry of Finance or the other regulators which would examine such a deal, beginning with Antitrust Authority director general David Gilo, who under the new concentration in the economy law is responsible for examining the allocation of the state's assets.
Another problem that makes it preferable to ignore Steinitz's statement is that the government cannot support the problematic hints in the statement, which said, "The Israeli government, which owns the golden share in Israel Chemicals, will not allow any deal that jeopardizes or harms the economic and environmental interests of the State of Israel and its citizens," if Potash Corporation decides to seek explanations about this statement.
To avoid further exacerbating relations with the Canadians, they were notified on Saturday night that the government would consider a formal request by Potash Corporation to increase its stake in Israel Chemicals, and that the required reviews would be conducted.
When an official request is received, the government - besides carrying out an examination of the buyer, a well-known multinational - will also have to consider the significance of a change in ownership of Israel Chemicals, if any. How would a merger be different from the current situation in which Potash Corporation has owned 13% of Israel Chemicals for 13 years, in terms of Israel's vital interests, which are protected by the golden share? In the event of potential deterioration, would it be possible to intervene, and with the consent of the government and its regulators, which are required by the vital interest directive, to demand changes in the current wording, or maybe even changes in the relationship between the state and the franchisees over royalties and taxes.
In any event the franchise given to Israel Chemicals' controlling shareholder Israel Corporation (TASE: ILCO) to exploit and quarry the Dead Sea's resources until 2030 is valid regardless of ownership of the company.
A minister's fate
Steinitz is in the midst of an election campaign, which will first of all decide his personal fate in the Likud's party list for the Knesset, and then the fate of the Likud and his chances of having an executive position in it. It is possible that in his statement he sought to find favor and win the support of thousands of Israel Chemicals and its subsidiaries' employees and their families, many of whom are Likud activists and play an active role in the party's primaries. On that same Thursday that Steinitz made his statement, the Dead Sea Works workers committee issued a statement of its own, demanding "urgent disclosure and the start of immediate negotiations on a collective agreement."
The Histadrut (General Federation of Labor in Israel) and the workers committee announced that they "View with the greatest seriousness these contacts about a deal… This is unacceptable conduct and bad faith by the company's management, in complete violation of the most basic duties of collective labor relations."
Published by Globes [online], Israel business news - www.globes-online.com - on November 5, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012