Israel Chemicals CEO: Merger would strengthen us

Stefan Borgas told "Bloomberg": We'll be stronger after a deal with Potash, depending on the details and strategy.

"There are no talks at the moment with Potash Corporation," Israel Chemicals Ltd. (TASE: ICL) CEO Stefan Borgas told "Bloomberg" during a Tel Aviv Stock Exchange (TASE) conference to mark the 20th anniversary of the company's IPO. "We'll be stronger, not weaker, following such a deal, but that depends on the details and strategy."

Earlier this week, a government official told the Beersheva District Labor Court that there were no talks with Potash Corporation of Saskatchewan Inc. (NYSE; TSX: POT) on the acquisition of Israel Chemicals. Israel Chemicals' employees are worried about layoffs and the transfer of production to Jordan, where the cost of labor is cheaper.

"Globes" also disclosed earlier this week that Idan Ofer, the controlling shareholder of Israel Chemicals' parent company, Israel Corporation (TASE: ILCO), is considering moving to London, partly for tax reasons. If Israel Chemicals is sold, and Israel Corp. withdraws a hefty dividend after the sales, Ofer will earn huge capital gains, making tax liabilities even more important.

Although official Israeli sources deny that there are talks for the sale of Israel Chemicals, it was reported yesterday that Canadian Minister of Foreign Affairs John Baird met Israel Corp. chairman Amir Elstein at a restaurant in Tel Aviv.

"We are unaware of these talks," Borgas told "Bloomberg" in response to a question about the talks with Potash Corporation. "If an offer is made, we'll examine it."

"Bloomberg" pressed Borgas, asking whether he saw Israel Chemicals as a public company in 20 years, of if a deal with Potash Corporation would result in Israel Chemicals being delisted. "No offer has been made," replied Borgas.

At the conference, TASE CEO Esther Levanon said, "Israel Chemicals is one of the most important companies on the TASE and leads in trading volume. It is an example of how to turn a government company into a public company, and the dizzying success that is now being fought over. Israel Chemicals represents Israel on leading indices. Its weight is so high that it accounts for 20% of Israel's weight on the index of global companies."

As for a possible merger of Israel Chemicals with Potash Corporation, Levanon said, "If Israel Chemicals ceases to be Israeli, it will be removed from global indices and the damage to the country will be great. Israel's weight on leading indices will fall. But it's possible to find solutions, such as a partial merger, which will keep the nationality and capital market listing, such as BHP Billiton (LSE: BLT; NYSE: BHP, BBL; ASX: BHP: JSE: BIL) and other companies in the world. Obviously, we won't object if Potash Corporation were to list in Israel."

Nonsense is written about Israel Chemicals

Borgas said, "We have reached an important junction regarding the future of Israel's phosphate industry. Our Rotem based phosphate activities are among the highest cost operations in the world. To become competitive we must reduce operating cost and increase volume significantly at the same time. ICL’s Rotem team is ready to engage on both and the corporation is ready to invest hundreds of millions of dollars into the site. But the current phosphate reserves will only last for another 10 years. In the mining business this is just a blink of an eyelash. 30-50 years reserves are what is necessary to start such investments.

"The solution for this problem has also been developed: the only and new phosphate reserves that can be mined economically are in Sde Barir so the process of securing mining licenses has reached the moment of truth. By allowing us to mine phosphates in Sde Barir, we will invest hundreds of millions of dollars, and will be able to secure reserves for around 30 years of future operations in Israel. But if we do not receive the licenses, it means that we will have to stop our Israeli phosphate activities within 10 years."

Commenting on the criticism of Israel Chemicals in the media, Bogas said, "As a new Israeli I am quite frankly surprised about the large amount of nonsense that is publicly written and said about the company. This tweaking of facts also really hurts our employees and business partners, more than 30,000 women, men and children in Israel. Let me explain:

"The cash Israel Chemicals L delivers to the Israeli governments directly every year exceeds a billion shekels a year, including the taxes, royalties and taxes on dividends that we pay directly to the government. This amounts to 35% of our profits in Israel. In the future, we will be paying even more, as a result of changes in the tax policies applied to Israel Chemicals alone. We expect the government take to reach 45%, which is the highest government paid by any fertilizer or chemical company in the world.

"In addition, the state receives approximately NIS 2 billion indirectly through the taxes that our employees and contractors pay from the money that we pay them directly. This is above and beyond the significant contribution that Israel Chemicals makes to the state’s balance of payment through our annual export of goods valued at approximately NIS 12 billion."

Published by Globes [online], Israel business news - www.globes-online.com - on April 10, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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