In Surprise Move, Israel Corp. Will List Spin-off Kenon in Tel Aviv

Holding company names new CEO as it releases more details of restructuring plans.

Aviv Hofi

The Israel Corporation said yesterday that Kenon Holdings, the company it plans to spin off as the conglomerate splits itself into two parts, will be traded on the Tel Aviv Stock Exchange as well as in New York.

The surprise news came as the holding company released more details of the massive restructuring it plans to complete by the end of the year. In addition, Israel Corporation also announced that Avisar Paz, now its chief financial officer, will take over as CEO after the restructuring is complete.

The TASE greeted the news by lifting shares of Israel Corporation 3.2% to 2,004 shekels ($536.09) in Tel Aviv, making it the biggest gainer among TA-100 shares for the day. The holding company, which is controlled by Idan Ofer, aims to increase its stock market valuation by listing its shares, as well as those of its Israel Chemicals unit abroad.

Israel Corporation last month sold a 6.2% stake of ICL as part of ICL’s initial public offering on the New York Stock Exchange. It still holds 46.7%.

The asset reshuffle calls for Israel Corporation, one of Israel’s largest holding companies, to move its stakes in Zim Integrated Shipping Services, its Chinese auto making venture Qoros, the chip maker TowerJazz and the electric power holding company IC Power into Kenon.

The slimmed-down Israel Corporation will retain a 49.1% stake in ICL and 37% of Oil Refineries, its older, more profitable and more stable holdings.

Among the details of the split revealed yesterday is that even though Kenon will be listed on the TASE at a $1.5 billion valuation, the company itself incorporated in Singapore. Israel Corporation will inject $100 million of capital into Kenon, provide it with a $200 million credit line and assume $300 million in guarantees it had pledged to Qoros.

Moreover, details released show that the slimmed down Israel Corporation will assume all the conglomerate’s $1.7 billion in net debt, counting on dividends from ICL at least through January 2017, when the government’s Sheshinski committee’s recommendations go into effect.

Weighing another split

Israel Corporation said it is also weighing a further split – spinning off Oil Refineries. That move, it said, would depend on market conditions and regulatory approvals. If so, the company said it might be done as a share dividend paid to Israel Corporation stockholders.

Israel Cororation’s decision to list Kenon on the TASE may be a tactic aimed at winning approval for the restructuring from minority shareholders.

The Israel Securities Authority views the break-up of the big holding companies like Israel Corporation and Yitzhak Tshuva’s Delek Group, or moving their operations into overseas companies, as the personal initiatives of their controlling shareholders. That requires a majority of minority shareholders to give their backing.

But minority shareholders have good reason to look askance as these kinds of restructurings. Such moves are likely to weaken the rights of minorities, allow the company to file financial and other reports in English, making it harder for the Hebrew-speaking public to follow and making it more difficult to file class action suits.

Paz’s appointment as the next CEO, meanwhile, comes a month after Nir Gilad said he would step down at the conclusion of the restructuring after eight years at the post. Israel Corporation said Natan Yelovsky, a board member of IC Power, would become acting CFO.

Paz, a graduate of Tel Aviv University in accounting and economics, has been CFO since 2001 and has served as a director of ICL, ZIm and Oil Refineries. He will be heading a much smaller company than the one Gilad ran.