The ministerial privatization committee is scheduled to discuss on Sunday a proposal by Minister of Finance Moshe Kahlon and Minister of Communications Ayoob Kara to privatize the Israel Postal Company. As reported in "Globes," the two-stage privatization was prepared by the Government Companies Authority, after Kahlon approved it in principle.
In the first stage, 20% of the Israel Postal Company's shares will be sold to an investor from Israel or overseas in a private placement. The maximum number of directors on the company board at this stage will be 11, three of whom will represent the buyer or be recommended by him or her, depending on the appointment mechanism established.
In the second stage, 20% of the Postal Company's shares will be issued on the Tel Aviv Stock Exchange (TASE). Following the offering, the maximum number of directors on the company boards will be 12, only two of whom will be from the private placement purchaser.
The sale process will be an auction, as is the usual practice in a private placement by the Government Companies Authority. In this process, the Government Companies Authority will be entitled to take into account the price offered for the shares and the purchaser's capability in the company's fields of business or tangential fields of activity, including postal bank activity.
The second part of the process will take place within two years of the completion of the private sales, through an offering to the public via a prospectus that will include an offer for sale by the state and/or a financing round for the company on the TASE. After both stages are completed, the state's fully diluted share will not fall below 60%.
Mail volume greater than packages market
Where the state's critical interests are concerned, it was stated that the Government Companies Authority would compile a list of these interests in the Postal Company and the Postal Bank Company, with the consent of the Ministry of Communications and the Israel Security Agency, and would consider ways of protecting them. In this framework, the possibility of restricting a holding without prior approval to 5% of the company's shares will be considered.
In the privatization plan, the Government Companies Authority states that the background for the decision to privatize the Postal Company is the downtrend in its profits and cash flow in recent years.
The Postal Company's dire cash flow situation is partly due to a change in the postal sector trends, reflected in an 8% average annual decline in the volume of mail. The main reason for this is probably the switch to electronic substitutes, but the company's structure and regular conduct are also a factor.
The market for package deliveries via e-commerce is booming, but at this stage, the boom is not compensating for the decline in the postal market, because the postal market is still substantially larger than the packages market.
According to the Government Companies Authority, bringing a strategic investor into the Postal Company in the first stage and offering its shares on the TASE in the second stage will help the company achieve transparency, efficiency, and long-term profitability.
In this context, the Government Companies Authority says that most of the elements of the Postal Company's business compete in the markets against private companies. "The entry of a strategic investor as an active partner will make it possible to finance the recovery plan and implement the planned cost cutting in the company in the first stage. In addition, the private placement will facilitate both the development of new growth engines in the company and the expansion of postal activity. Eventually, the inclusion of a private investor is likely to contribute to an increase in the company's value, and to shorten the timetable for the second stage in this privatization plan - the public offering," the Government Companies Authority states.
Published by Globes [online], Israel Business News - www.globes-online.com - on March 22, 2018
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