Yesh Atid Party chairman and former Minister of Finance Yair Lapid yesterday came to support the Israel Chemicals (TASE: ICL: NYSE: ICL) workers in their struggle against layoffs. He severely criticized Prime Minister Benjamin Netanyahu for neglecting them. Information obtained by "Globes," however, shows that had it not been for Lapid's stubborn opposition to the acquisition of Israel Chemicals by Canadian company Potash Corporation of Saskatchewan, the current layoffs might have been avoided, and furthermore, the state would have made billions of shekels on the deal.
Netanyahu supported the deal. In late 2012, Potash Corporation was considering the acquisition of a controlling interest in Israel Chemicals. "Globes" has obtained a presentation prepared by Potash Corporation for Netanyahu in which the company undertook that if the government approved the acquisition, not a single Israel Chemicals employee would have been fired, and all the employees' work agreements and conditions would have been preserved. Potash Corporation management also undertook to maintain the production quantities at Israel Chemicals' facilities in Israel, and to preserve the company's Israeli character - including at the level of management and the board of directors: in other words, to retain the board of directors and management team unchanged. Potash Corporation also undertook to maintain the state's golden share in Israel Chemicals.
The presentation to Netanyahu, which took place two years ago in the Prime Minister's Office, was led by Potash Corporation CEO William Doyle and CFO Wayne Brownlee. They came to Israel specifically to promote the merger with Potash Corporation, which was to have yield proceeds in cash and shares. Besides Netanyahu, outgoing Prime Minister's Office director general Harel Locker was present. Doyle and Locker explained to Netanyahu and Brownlee the advantages of the deal for the Israeli economy: bolstering the competitiveness of Israel's natural resources, boosting Israeli exports, and penetration of new markets by Israel Chemicals, a positive sign for foreign investments in Israel for a global investor, and further tightening of links between Israel and its Canadian ally.
The Canadian Foreign Minister and the Potash Corporation chairman were willing to go forward with the negotiations according to the presented outline, and no opposition was expressed in the Prime Minister's Office, either. Netanyahu supported the sale by the Ofer family of a controlling interest in Israel Chemicals to the Canadian company, among other things because of Israel's political ties with the Canadian government under the leadership of Prime Minister Stephen Harper, an enthusiastic supporter and great ally of Israel. At the same time, talks were also held with then-Histadrut chairman Ofer Eini. The workers committees opposed the acquisition deal. After the presentation of the initial outline, it appeared that the deal was making progress. In March 2013, however, a new government was sworn in with Yair Lapid as Minister of Finance.
On April 10, less than a month after taking up his new job, Lapid announced his opposition to any merger between Potash Corporation and Israel Chemicals, and that he would refuse to approve it. Approval from the Minister of Finance is essential to any such merger, because the state, which formerly owned Israel Chemicals, still holds a golden share in the company that enables to oppose any deals causing a change in the company's ownership. The proceeds from the deal for sale of Israel Chemicals to Potash Corporation were to have been partly in cash and partly in shares. The Israel Chemicals shareholders were to have received shares in the Canadian company.
Calling off the deal also deprived the state of an estimated NIS 4-5 billion in capital gains tax. Since the Potash Corporation deal was canceled, the Israel Chemicals share has plunged 40%, and its market cap has been cut from NIS 60 billion to NIS 35 billion.
"I saved Dead Sea Magnesium"
Lapid yesterday attended the workers' demonstration and called for the layoffs to be withdrawn. "Don't be confused; there's no cost cutting involved. What we have here is a cynical attempt by management at the expense of the workers to obtain tax benefits that they don't deserve, to do away with the Sheshinski 2 Committee recommendations, and to regain what they were used to getting at your expense. We won't let them. It can be stopped," Lapid said.
The former Minister of Finance took pride in his decision to halt the acquisition, saying, "I stopped the Potash Corporation deal, I saved the magnesium factory, it can be stopped. Instead of going to Washington, the Prime Minister should come here. What Netanyahu should have done as Minister of Finance was to summon Idan Ofer and the CEO and say, 'I'm using the golden share. I'll cancel all your tax benefits. I and all the power of the state will be directed against you if you don't cancel these ugly and unnecessary layoffs'… It's a fact that when I was Minister of Finance, there were no layoffs, because they knew we weren't in anyone's pocket. The fact that the Prime Minister isn't dealing with it is utterly irresponsible… He can prevent these layoffs, but he simply doesn’t care."
Lapid said in response, "I still think that Israel Chemicals should not have been sold to Potash Corporation. The Dead Sea belongs to the Jewish people, not to any private company. It's a national asset, and you don't sell national assets to foreign companies. Idan Ofer's threat to fire Israel Chemicals' workers is designed to mislead the Israeli public. The Sheshinski 2 Committee recommendations focus on levying an excess profits tax, in other words surplus profits, and do not affect the company's revenue. The model established does not affect the incentive for making new investments, and ensures balance, so that industry, especially in the Negev, is not hurt, and will continue to be attractive, and to constitute a significant part of the economy's growth engines. In 2006-2010, when the shareholders' stake rose tenfold, the state's share of Dead Sea Works' activity rose only threefold during the same period.
"The current situation makes the Israel Chemicals' shareholders, not the public, which owns the minerals, the principal beneficiaries of the rise in natural resources prices. The aim of the Committee's conclusions is for the public to get the money it deserves, instead of the shareholders. There is no connection between excess profits tax and layoffs."
Published by Globes [online], Israel business news - www.globes-online.com - on February 16, 2015
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