Potash Corp. of Saskatchewan Inc., considering a takeover bid for Israel Chemicals Ltd., is preparing concessions ranging from job guarantees to a local stock-market listing to allay concern that a deal would harm Israel’s national interests, according to a person familiar with the plans.
Any bid for the company put to the newly formed Israeli government, which can veto a transaction, would include pledges to improve environmental protection and maintain employment and production levels, according to this person, who asked not to be identified because the plans aren’t public. Potash is also mulling an offer that would be partly cash-based to generate tax revenue for the government in a revised bid, which may be put forward in about a month, the person said.
“Potash has to do everything within their power to show that they are coming in friendly terms and that this deal is good for Israel,” said Gilad Alper, a senior analyst at Excellence Nessuah Investment House Ltd. in Ramat Gan, Israel. “The odds are still against them as here they are seen as a foreign interloper.”
Israel Chemicals fell less than 1 percent to 47.26 shekels in Tel Aviv trading.
To win over the Israeli government in a bid to become the world’s biggest producer of potash, Potash Chief Executive Officer Bill Doyle needs to deliver a deal that overcomes public objections to the plan. Yesh Atid, Israel’s second-biggest political party, has criticized the proposed deal for its potential to harm the Negev region, and Israel Chemical workers have staged protests against the takeover.
Potash may also propose a listing on the Tel Aviv Stock Exchange to ease concern that Israel Chemical’s delisting would hurt trading volume on the exchange, the person said.
Israel Chemicals, the nation’s second-largest publicly traded company, has a market value of 60.6 billion shekels ($16.4 billion) based on yesterday’s close in Tel Aviv. Potash buying the 86 percent of Israel Chemicals it doesn’t already own would be the largest takeover in the Middle East, according to data compiled by Bloomberg.
A windfall from a tax-based deal may come at a critical time for Israel as the new government will have to slash spending by 14 billion shekels from the 2013 budget, according to Alper.
“No politician wants to be seen as the one who gives away a critical natural resource for nothing,” said Alper. “On the other hand, if Potash can sweeten the deal and a transaction becomes a tax event, it certainly helps to make their proposal more persuasive.”
Israeli Prime Minister Benjamin Netanyahu today reached an agreement on a governing coalition that may hold 68 of parliament’s 120 seats. The coalition will be led by Netanyahu’s Likud party, which ran in Jan. 22 elections on a joint ticket with the Yisrael Beitenu faction, winning 31 seats.
The government can block takeover bids using its so-called golden share. Israel Corp. Ltd., which is controlled by billionaire Idan Ofer, has a 52 percent majority stake in Israel Chemicals.