Who Rakes in Billions From Intel's $15b Mobileye Buy?

The biggest beneficiaries will be the Mobileye’s shareholders, founders and senior executives, who stand to enjoy profits in excess of $3 billion from the Intel deal.

The Mobileye logo appearing on a screen at the post where it trades on the floor of the New York Stock Exchange, Monday, March 13, 2017.
The Mobileye logo appearing on a screen of the New York Stock Exchange on Monday. The Intel deal may be the harbinger of more Israeli auto tech companies' success. Richard Drew/AP

The biggest beneficiaries from Intel’s decision to spend $15.3 billion on the Israeli driverless-technology firm Mobileye will be the company’s shareholders, founders and senior executives, who stand to enjoy profits in excess of $3 billion.

But the Israeli government won’t be far behind, collecting a tax windfall that could add up to more than $1 billion.

Shmuel Harlap, a founder of Colmobil (which imports Mitsubishi and Hyundai cars into Israel), is Mobileye’s principal outside shareholder: His 7 percent  stake will be worth about $1 billion under the terms of the sale. Mobileye’s cofounders – Amnon Shashua, who is also chairman and chief technology officer, and CEO Ziv Aviram – own 7.5 percent and 7 percent, respectively, and will also be getting $1 billion-plus.

Unlike Harlap, who was one of the company’s first investors and says he never sold any of his shares, Aviram and Shashua have already earned big profits on their Mobileye shares: they have been selling them on the stock exchange over the last two and a half years. Based on filings with the U.S. Securities and Exchange Commission, Shashua had sold some $200 million worth of shares to date, including $45 million last year, while Aviram had sold $240 million worth of shares, including $80 million last year.

Harlap’s business relies less on borrowing than many other Israeli tycoons, so he could afford to retain the shares even when their price peaked in 2015 and he could have sold them for $1.2 billion, industry sources said. Harlap had expected the company to reach a higher valuation than the one reflected by the Intel deal.

According to Mobileye’s financial reports, the company’s managers and workers have 29 million in stock options they haven’t exercised. Of these, 19 million have already vested, but options vesting is typically accelerated during an acquisition.

The options can be exercised at an average price of $21, which means an average profit of $42.50 a share because Intel will be buying Mobileye stock at $63.54 a share. All told, that adds up to a combined $1.2 billion for Mobileye’s managers and employees.

Among those with the biggest payouts are Gaby Hayon, senior vice president for research and development, who is due $11.3 million; Chief Financial Officer Ofer Maharshak ($7 million); and board member Eyal Desheh ($6.3 million).

According to the website Stocker, the biggest winner among Mobileye’s institutional investors will be Menora Mivtachim, whose 941,000 shares are worth $60 million. Other institutions hold smaller quantities of shares worth only a few million apiece.

Shashua, Aviram and Harlap face a capital gains tax of 25 percent to 30 percent, in addition to a tax surcharge of 3 percent. As a result, they’re expected to pay over $1 billion in taxes on the $3.3 billion they receive from Intel, including options that vest within the next month.

In shekel terms, that comes to about 3.7 billion shekels in taxes to the Tax Authority. To illustrate how big a windfall that will be for the treasury, the government’s recently completed tax amnesty program is expected to bring in about 2 billion shekels over the two and a half years it ran.

The next three largest shareholders – Hayon, Maharshak and Desheh, with about 100,000 to 200,000 shares each – are expected to pay a total of a few tens of millions of shekels in capital gains tax.

Tax rules allow employees exercising stock options to classify the profits earnings not as wages but as capital gains. Even in cases where the two-year period required for reporting the sale as capital gains has not yet ended, they can leave the money with a trustee until the period ends and pay only the 25 percent capital gains tax rate – a major saving.