Gabi Ashkenazi to Explore for Oil With Jacky Ben-Zaken

Former chief of staff to get NIS 100,000 a month for 75%-time post.

Israel's former top soldier is joining the oil-exploration firm Shemen, which is controlled by businessmen Jacky Ben-Zaken, Haim Leibovich and Avraham Nanikashvili. Gabi Ashkenazi will chair the board of directors and advise the company on "strategic matters," Shemen said in an announcement to investors.

On Sunday, Shemen filed a prospectus ahead of a public float in Tel Aviv. The prospectus reveals that the company hopes to raise NIS 100 million by month's end. The enterprise value at which it might do so remains unknown.

Gabi Ashkenazi - Daniel Bar-On
Daniel Bar-On

Shemen owns rights to the maritime prospect of the same name, which used to be known as Med Ashdod, off the Palmahim shoreline.

How much money the company raises, and its timing, remain to be seen, given that investors are running scared and the offerings market has all but dried up. Also, Shemen had hoped to raise money according to an enterprise value of a billion dollars. Given the sour sentiment in the markets, that may not be possible. This is where the appointment of Gabi Ashkenazi comes in.

Shemen does not disguise Ashkenazi's role. It explains that he will serve as an adviser on "strategic matters," will help identify business opportunities - and also, the company spells out, will play an active role in its fundraising efforts.

The former chief of staff will also represent the company before the authorities and investors, Shemen adds.

Capital market sources surmise that Shemen's owners chose to hire Ashkenazi in order to strengthen the company's ties with the capital market - or, in plain English, to polish its image. Jacky Ben-Zaken's reputation has been tarnished by an Israel Securities Authority investigation into alleged manipulation of Financial Levers stock.

The company will be paying handsomely for the pleasure. Ashkenazi, who retired from the IDF this past February, will be grossing NIS 100,000 a month, linked to the consumer price index, for taking on 75% of a full-time position. He will also get bonuses if the offering comes off, and illiquid options for 3% of the company's stock. On top of that Ashkenazi will get a leased car, reimbursement of expenses and 21 vacation days per year.

Ashkenazi will be paid through a private company named after his children, Galti, which makes the effective rate of tax 44% (corporate tax plus dividend tax ). Pay of NIS 1.2 million a year in gross terms adds to his NIS 50,000 a month pension from the army, that being 70% of his pre-retirement pay.

If his income stays at these level, in 20 years' time, Ashkenazi will have been paid NIS 35.8 million, of which pension pay is NIS 11.8 million. That does not include income from exercising stock options.

His ties in the military community could serve Shemen well, as it will need Defense Ministry permits to drill by the Palmahim shore. Back in 1993, the first time the seabed off Palmahim was explored, the military effectively halted the drilling by requiring that on demand, the rig be capable fo being evacuated from the site within 24 hours.

Only in 2006 did the Defense Ministry reach an agreement with the explorers. Upon the ministry's order, the agreement states, most of the team running the site would have to decamp immediately, leaving behind a skeleton staff - and the rig. That won't have to move. Only now, however, has Shemen applied for formal approval from the ministry, which remains pending.