Israel Corp to Split Into Two Companies

28.06.2013 -

Israel Corp, one of Israel's biggest holding firms, plans to spin off some of its less-profitable assets into a new, listed company in a bid to boost the value of its core businesses and attract a broader range of investors, it said.

If the separation is approved, shareholders of Israel Corp will also hold shares in the new company, it said in a statement. It estimated the separation process would be completed within 6-12 months.

Under the plan, Israel Corp would continue to hold two of its most lucrative and stable companies - speciality chemicals maker Israel Chemicals (ICL) and Oil Refineries , Israel's biggest refinery. That would mean divesting itself of a bundle of assets analysts view less positively.

The announcement on Wednesday prompted an 8.4% rise in the company's shares, outperforming a flat broader index. Upon completing the break-up process, Israel Corp said it would refrain from making investments in new companies.

The separation of Israel Corp's holding in Oil Refineries will also be considered in the future, it said, which would leave Israel Corp holding only its cash cow - ICL. IC Power, Qoros, shipping company Zim, chipmaker TowerJazz and IC Green would be held by the new company whose place of registration for trading would be on an international exchange.

Israel Corp chairman Amir Elstein said it was considering listing in Asia since much of the focus of these firms was in Asia and emerging markets. "Nothing has been ruled out but it will not be an Israeli-only listed company," he said.

Every shareholder in Israel Corp will receive a new share in the separated company alongside each existing share in Israel Corp, the company said.


Zim's Debt

Before the reorganization, Israel Corp will work towards resolving Zim's $2.7 billion debt load through a restructuring with banks, shipyards and bondholders. "We know we must close the Zim issue in six months and we will," Elstein said.

He said Israel Corp will continue to invest in Zim after the restructuring. "It's a good company once we fix it (the debt problem)," he said. He added that Zim needed more time to pay off their debt.

Noam Pincu, an analyst at the Psagot brokerage, said that Israel Corp trades at a steep discount of 46% to its net asset value, with the market valuing the company's assets excluding ICL and Oil Refineries at a negative $900 million. 

"We believe this move will lead to a significant narrowing of the discount and ultimately it will stabilize at a more reasonable level for holding companies - 20-25%," said Pincu, who raised his rating for the stock to "buy" from "hold". Pincu said Zim's debt restructuring before the spin-off goes ahead, "which will increase the level of certainty regarding the new company".

"Our goal is to increase exposure of the company's holdings to both a broader and more focused investor base in the areas of activity relevant to each holding," Elstein said.

Qoros, a joint venture between Israel Corp and Chery Automobile, is also expected to launch its new car before the spin-off happens, Pincu said.
He valued the profitable IC Power, which is building a power plant in Peru, at $1.3 billion and said it could go public in the future.