Haifa District Court Judge Adi Zarankin on Wednesday eased the terms under which Zim Integrated Shipping Services is required to get the government’s permission to sell or transfer its shares.
In a decision that will play a key role in the recovery of the company from its $3.4 billion debt burden, Zarankin ruled that the government’s veto power in the matter would apply to sales or transfers over 35% or more of Zim’s equity, instead of the 24% previously in force.
He said Zim would still have to give the state advance notice of any move involving shares equal to between 24% and 35% of equity.
Furthermore, the judge said the government retained the right to turn to the court for a ruling if it concludes that a share sale or transfer threatens to harm Israel’s national security interests. In such a case, the state would have to notify Zim of its concerns within three weeks after being informed of the sale plans.
Zarankin’s decision comes five days after minority shareholders of The Israel Corporation approved a bailout plan for its financially troubled Zim unit. Under the plan, creditors would write down $1.4 billion of Zim’s debt in return for a 68% stake in the shipping company. Israel Corporation, which now controls nearly 100% of Zim, would retain a 32% stake in exchange for injecting $200 million of new capital into Zim.
However, the bailout still faced a final obstacle in the government’s so-called “golden share,” which it retained after Zim was privatized and entitles it to veto rights to ensure the country’s national security interest.
Zim expressed satisfaction with the ruling. “It allows us to move forward with the debt arrangement and the company’s recovery. The decisions gives both sides what they wanted. We hope the government won’t go ahead with legislation on the matter of golden shares,” ZIM said.
The government has said it would appeal any ruling that infringed on its rights in Zim. But on Wednesday, a source in the Finance Ministry who asked not to be identified expressed satisfaction with the ruling.
“The decision is a victory for the state, which preserved its right to approve the identity of any buyer for more than 24% of Zim shares and to oppose transfer control [of the company] to a hostile entity,” the official said.
The veto power accruing to the golden shares threatened to complicate Zim’s efforts to find merger and acquisition partners as it means of coping with a global glut of shipping capacity and slow growth in world trade
Zarankin’s decision in effect puts the veto power in the hands of the court instead of the Government Corporations Authority. While Israel Corporation will remain Zim’s biggest shareholder, the shipping company’s new charter would give it only two of nine seats on Zim’s board.
Zarankin had sought to supervise a compromise between the government and Israel Corporation, proposing that veto power be set at sales or transfers of 40% or more of Zim stock. But the government, which had insisted that only the High Court of Justice could rule on the status of its golden shares, rejected it.