Granite Hacarmel Investments (TASE: GRNT) has signed a term sheet for the sale of Sonol Israel Ltd. to Dor Alon Energy in Israel (1988) Ltd. (TASE: DRAL).
Under the agreement, Dor Alon will acquire 100% of Sonol’s issued share capital, 100% of the issued share capital of Allied Oils & Chemicals, and Sonol’s minority holdings in Haifa Basic Oils Ltd. (HBO), and Pi Glilot Petroleum Products Pipes Ltd. The $155 million sale price will be paid in full when the final contract is completed.
The following assets, fully or partially owned by Sonol, are not included in the sale: a 50% stake in Supergas Israel Gas Distribution Co. Ltd. and five real estate properties, including Sonol’s holding in Sonol Tower in Tel Aviv.
According to Ministry of National Infrastructures figures, the Dor-Alon group currently has 157 fuel stations and Sonol 216, making 373 altogether. Paz, which before this deal was considered the industry leader, has 253 stations.
Dor-Alon says completion of the deal will change the face of Israel's energy industry and break Paz's monopoly. Sources at Dor-Alon point out that, in the past, the Antitrust Authority approved a putative merger between Sonol and Delek, which would have led to a group with 450 stations.
Today's deal was greeted with complete surprise in the fuel industry. Rival fuel companies Delek Group (TASE: DLEKG) and Paz knew nothing of fit. Industry sources say the deal weakens competition in the industry, since Dor-Alon will have 46% of diesel fuel sales and 40% of gasoline sales.
The sources said that the Antitrust Authority director was presiding over a return to concentration in the fuel economy, in which there would be two main players.
Granite HaCarmel CEO Ami Sagis told "Globes" this was an excellent deal for all concerned. He said it was good for Granite HaCarmel, good for Sonol, good for Dor-Alon, and good for the economy. He added that combining two smaller companies would enable them to compete more effectively in the fuel market.
Granite HaCarmel sold Sonol with the intention of investing in water infrastructures. Sagis said that reducing the number of important players in the fuel sector, from four to three, would actually boost competition, since Dor-Alon would now measure up to Paz.
David Wiessman told "Globes" that the deal was put together within a few days. He said it was closed with Oded (Dedi) Borovich and Tami Mozes-Borovich, who he said acted honestly and fairly.
Sources at Dor-Alon said the acquisition of Sonol would give the company an important advantage, in that it would now be able to import fuel, which it could not do before because of the absence of economies of scale. Importing fuel from overseas will enable Dor-Alon to compete with Oil Refineries' prices. Sonol's fuel terminal at Haifa will be transferred to Dor-Alon, along with an oils factory, partnership in Pi Glilot, and a haulage network.
Dor-Alon Energy is the exclusive supplier of fuels to the Palestinian Authority, under an agreement signed in 1994 and extended since then.
Published by Globes [online] - www.globes.co.il - on September 7, 2005