The privatization of Oil Refineries Haifa, via one of the largest IPOs ever held on the Tel Aviv Stock Exchange (TASE), was launched today with an institutional tender held at a minimum company value of $1.04 billion. Every large business in Israel capable of doing so will bid for up to a maximum of 4.99% of the company, alongside foreign companies and the general public. As of web-posting, with the tender for the sale of 40-50% of the company still underway, sources believe that it has been a success.
When the institutional tender is completed, the state will own 50-60% of Oil Refineries Haifa, which will be sold to a strategic investor. Today’s closing price will be the opening price in the sale of the controlling interest in the company, and it is already clear that the closing price in this sale will be at least 30% higher.
The big story in the Oil Refineries Haifa sale will take place on Thursday, February 22, when the public tender is held. Three bidders are currently known to be participating: the Federman group, Sammy and Idan Ofer, and Africa-Israel Investments chairman Lev Leviev. The first two are considered to be the most highly motivated and have the money, partners and plans to joust for control of the company.
Sammy and Idan Ofer are very familiar with Oil Refineries Haifa, which they owned in part through Ofer Brothers subsidiary Israel Corp. (TASE: ILCO), and they were loath to sell their stake to the government.
The Federman group, which includes Michael Federman, Leonid Nevzlin, and Meir Shamir, is also familiar with Oil Refineries Haifa: they jointly own Carmel Olefins Ltd.
Leviev is the wild card, and he plays them close to his chest. He has the capital to buy Oil Refineries Haifa outright, and afterwards seek strategic partners in the international market. Leviev could therefore buy Oil Refineries Haifa out from under Ofer Brothers and the Federman group.
A bidder offering a high price for a 40-50% stake in Oil Refineries Haifa will know with a high degree of certitude that he’ll close the deal, and he’ll therefore be cautious. On the other hand, a bidder offering a very high price for a 20% stake knows that he has a reasonable chance that there will be no demand for the package at that price, and the closing price will therefore be lower. If this bidder gets what he wants, he’ll ensure himself an initial stake at a very high price, and can then buy the rest of the shares on the market at a lower price.
It is not clear what the likelihood is that one bidder will make an offer so high that the other bidders will have to concede. More likely several bidders will in blocs amounting to 20-30% of the company, at which point the real battle will begin to buy the shares bought by the investment institutions.
Published by Globes [online], Israel business news - www.globes.co.il - on February 12, 2007
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