The huge profits made by Israel Chemicals Ltd. (TASE: ICL) unit Dead Sea Works are well known now, but the company's potential was not always so obvious. The valuation made for the Government Companies Authority, on which the privatization of the company was based, is the proof. "Globes" discloses this document for the first time. The difference between Israel Chemicals' unit Dead Sea Works estimated profits and its actual profits between 1998 and 2010 was NIS 13 billion.
The valuation for Dead Sea Works in September 1991 - 20 years ago - undertook a very ambitious goal to predict Dead Sea Works' sales and profits through 2017. The valuation was a critical document for the Ministry of Finance officials in charge of privatizing the company, as it set the value for Israel Chemicals' IPO.
The privatization of Israel Chemicals began in 1992 with the sale of 20% of the company on the TASE, based in part on a valuation of $1.3 billion for the company. Another valuation for the company at the time was even lower. In 1995, the late Shaul Eisenberg, through Israel Corporation (TASE: ILCO), acquired the 24.9% controlling interest in Israel Chemicals for $231 million, on the basis its market cap at the time. In 1997, the government sold another 17% of Israel Chemicals to Eisenberg for $200 million.
Then Government Companies Authority director Tzipi Livni, now the chairwoman of Kadima and head of the Opposition, told the Knesset Finance Committee at the time that the government made money on the sale, because prices on the TASE were up.
Eisenberg died in 1997, and two years later, in 1999, Israel Corp. was sold to Ofer Holdings Group, owned by the Ofer family.
Israel Chemicals tried to prevent the disclosure of this report. When "Globes" asked the Government Companies Authority to see the document, Israel Chemicals filed an objection, on the grounds that it was liable to mislead TASE investors. The company withdrew its objections only after the Government Companies Authority said that there were no grounds for such a claim.
A comparison of forecasts for Israel Chemicals with its actual performance shows a huge gap for some subsidiaries, most of all for Dead Sea Works. For example, the analysts predicted a 2010 profit by Dead Sea Works of NIS 189.6 million profit; its actual profit was 13 times higher - NIS 2.5 billion. The company's NIS 5.3 billion profit in 2008 was 30 times the analysts' forecasts, boosted by soaring prices for potash.
The "Globes" revelation comes as Minister of Tourism Stas Misezhnikov and Minister of Environmental Protection Gilad Erdan propose that Israel Chemicals pay most of the estimated NIS 5-7 billion cost of rehabilitating the southern basin of the Dead Sea, where the company's mining operations are carried out.
Published by Globes [online], Israel business news - www.globes-online.com - on June 16, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011