Fertilizer company Israel Chemicals (TASE: ICL: NYSE: ICL) has completed the sale of its fire safety and oil additives business for $1 billion to the SK Capital fund. Israel Chemicals first reported the deal in early December 2017. Israel Chemicals will post an $840 million capital gain on the deal in its reports for the first quarter of 2018.
The two product lines sold are advanced additives in Israel Chemicals' special solutions line of products. They were acquired by Israel Chemicals 12 years ago in a $250 million deal that also included other products. These products have become global leaders in recent years following organic growth and supplementary acquisitions by the company.
Israel Chemicals' management nevertheless decided to sell the two product lines, because there was little synergy between them and the company's core business. Israel Chemicals previously announced a strategy of focusing its business on chains of minerals, reducing its debt, and creating sources of financing for the creation of new growth engines.
The activities that have now been sold contributed $245 million to Israel Chemicals' sales and $79 million to its operating profit in 2016. During the 12 years ending on September 30, 2017, these activities contributed $294 million to the company's revenue and $112 million to its operating profit, with help from the many fires in North America during this period.
Israel Chemicals' reported a 1% rise to $5.4 billion in revenue in 2017, while its operating profit was $629 million. The sale of the fire safety and oil additives business expected to cost Israel Chemicals 6% of its annual sales and 15-20% of its annual operating profit.
Investors were unenthusiastic about the deal and the large profit it is generating; Israel Chemicals' share price is down slightly in trading, pushing its market cap down to $18.6 billion.
Israel Chemicals chairperson Johanan Locker, who led the deal, said, "The deal is consistent with Israel Chemicals' strategy of selling business with little synergy; focusing on the minerals chain, the company's core business; and bolstering its advanced solutions for agriculture. Israel Chemicals intends to use the proceeds from the sale for immediate reduction of its debt and the creation of financial resources for taking advantage of growth opportunities that are consistent with the company's strategy."
Israel Chemicals is currently in the process of replacing its CEO. A month ago, the board of directors approved the appointment of Raviv Zoller to replace acting CEO Asher Grinbaum, who has been filling the post since September 2016. Zoller is expected to take up his post in the coming months, although no specific date has been set.
Published by Globes [online], Israel business news - www.globes-online.com - on March 29, 2018
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