Israel Shipyards is discussing a joint bid to buy the government-owned port of Haifa, in northern Israel, with Dubai-based giant multinational port operator DP World.
DP World executives reportedly discussed the matter recently with Shlomi Fogel, a controlling shareholder in Israel Shipyards. The reports come just a few weeks after Israel and the United Arab Emirates agreed to normalize relations, leading to several bilateral business deals.
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State-owned DP World operates supply chain and logistics facilities, including ports, in 51 countries and employs about 56,000 people. In 2017, it handled 70 million TEU (20-foot equivalent units) of cargo, making it one of the industry’s biggest players. Besides its home base in the UAE, DP World has bases in the region in Turkey, Egypt and Algeria.
The coronavirus pandemic has hurt DP World’s business badly by disrupting global supply chains. In July, the company reported that volumes handled in the first six months of the year were down 5.3% from the previous year, at 33.8 million containers, and that profits plunged 56% to $333 million. Revenues climbed 18% to $4.4 billion due to an acquisition.
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Following a cabinet resolution in January to privatize Haifa Port, bidding is expected to get under way by the end of October. Israel Shipyards indicated in its prospectus ahead of its initial public offering on the Tel Aviv Stock Exchange this month that it was considering a bid.
Israel Shipyards operates a small port in Haifa, but it believes that the port sector is entering a period of increased competition and needs to grow its operations to be an effective player. Not only is Haifa Port being privatized but two new private ports are being developed in the country, one in Haifa (which will be operated by China’s Shanghai International Port Group) and in Ashdod. The new ports are due to begin operations next year.
Israel Shipyards operates three docks of 1,000 meters length that allow for the simultaneous mooring of four or five ships. When it bought the facility from the government in 2005, the company agreed not to handle tonnage exceeding 5% of that handled by the competing state-owned ports. Last year, it breached the ceiling and reached 5.8%. In the first half, it earned a 20 million shekel ($5.9 million) profit on the port, up 33% from 2019, as revenue climbed by almost 9% to 63 million. The company also builds and services miliary and civilian vessels.
Besides Fogel, its other main shareholders are Gold Bond, Samy Katsav and Asi Schmeltzer, each with a 20% stake. The shares began trading on the Tel Aviv Stock Exchange two weeks ago.