Another step has begun in unraveling the oil gas companies pyramid controlled by Haim Tsuff, headed by public holding company Equital, which has a NIS 4 billion market cap. The board of directors of Nafta Israel Petroleum, 64.5% of whose shares are held by Equital, and which holds the group's oil and gas exploration business, yesterday approved a merger agreement of the company and its subsidiaries with Isramco Inc. (Nasdaq: ISRL).
In contrast to Isramco Oil & Gas Exploration Ltd. LLP (TASE: ISRA.L), which is listed on the Tel Aviv Stock Exchange, Isramco Inc. is registered in Delaware in the US, and holds oil and gas assets in a number of US states. The company is also entitled to distribute super royalties from Isramco Negev 2's Tamar gas discovery.
Super royalties are a fixed payment from gross revenue paid to the general partner in oil and gas partnerships. They are not paid to holders of the participation units (the limited partner). These amounts are paid when actual production takes place and there is revenue from sales of oil or gas.
The super royalties at Isramco Negev 2 (to part of which Isramco Inc. is entitled) were 5.35% of the revenue until the development costs at the end of 2017 are covered, and then jump to 9.5% of revenue, which increased Isramco Inc.'s revenue starting in 2018.
Isramco Inc.: Light trading on Nasdaq
The company reported $80 million in revenue last year, 27% more than in 2017, and an $18 million net profit, compared with a $24 million net loss in 2017. Trading in Isramco Inc.'s share on Nasdaq is extremely light. The foreign company's share price rose only slightly over the past year, and its current market cap is $300 million.
The merger will be a triple reverse merger in which Yaad, a company with no activity, assets, or liabilities, will be merged with Isramco Inc., whose shares will be delisted from Nasdaq. At the end of the process, Isramco Inc. will become a private company fully owned by Nafta and its subsidiaries.
Isramco Inc.'s chairperson and CEO is Haim Tsuff, the controlling shareholder the Equital pyramid. Tsuff, who holds 2.3% of Isramco Inc.'s capital, is the right hand of Jackob Maimon, who is believed to exercise actual control over the pyramid. Tsuff's minority partner in the controlling core in Equital is the Livnat family, owner of heavy haulage company Taavura.
Nafta currently holds 70.7% of the shares in Isramco Inc., with the rest held by investment institutions and the public. Nafta is offering to pay $121.40 per share of Isramco Inc., an 8.7% premium on yesterday's closing price. Nafta will invest a total of $97 million in this maneuver. Completion of the merger is contingent on a number of suspending conditions and approval of the deal by a special majority of Isramco Inc.'s shareholders (75% of the company's shareholders and an ordinary majority of all the shareholders who do not have a personal interest in approval of the deal).
Delisting Isramco Inc. is part of the larger process of reducing the layers in the Equital pyramid, which has three layers of public companies and is therefore required under the Promotion of Competition and Reduction of Concentration Law to switch to only two layers by the end of 2019.
As part of the maneuver, Equital merged its JOEL subsidiary, until recently the second layer in the controlling pyramid, into itself three months ago, so that the third layer in the pyramid became its second layer, as required by the law. The merger between Equital and JOEL was preceded by a merger between the group's real estate companies, Airport City and Nitsba.
Published by Globes, Israel business news - en.globes.co.il - on May 21, 2019
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