Israeli Prime Minister Benjamin Netanyahu announced a new coalition March 15, which patches together a tenuous relationship with the Yesh Atid Party’s Yair Lapid and the Hayehudi Party’s Naftali Bennett. Israeli sources say Netanyahu will have to keep both partners happy or else risk the downfall of his government. The coalition is expected to be presented to the Knesset March 18 for a vote and swearing in.
While the proposed Potash Corp. of Saskatchewan Inc. purchase of Israel Chemicals Ltd. (ICL) did not appear to be thwarted by the coalition building process, the deal remains controversial going forward. Israel’s Finance Minister designate, Yair Lapid, has already expressed opposition. Several members of his party have been adamantly against it. Among the strongest voices against the deal within Yesh Atid is Meir Cohen, the former mayor of Dimona, a southern Israeli town that is home to thousands of ICL workers. Other members of the new coalition government are also opposed, as are most Knesset members from opposition parties.
“Even though many of the workers’ fears are unfounded, the current political climate in Israel, which is strongly opposed to tycoons and big business, will make it extremely difficult for the new government to approve the sale of ICL to PotashCorp,” said Jonathan Kreizman, head of research and senior analyst at Clal Finance and Brokerage, a leading Tel Aviv-based investment bank. Reports of huge tax benefits enjoyed by ICL and other large corporations at a time when Israel is facing a growing budget deficit have contributed to the debate. Kreizman said that the government has a lot of power that it could wield on issues like royalties, taxes, and other issues that could make the deal attractive. He stressed that the strong opposition makes it hard to see a deal being concluded.
Sources also say PotashCorp has been leaking analysis to the local media on the global fertilizer market and stressing that ICL has no choice but to merge if the company wants to remain relevant in the coming years. The reports have stressed that if a deal is reached, PotashCorp would take on all of ICL’s past commitments, and ICL would serve as PotashCorp’s spearhead in the African, Far Eastern, and Indian markets.
Kreizman rejects concerns about the future viability of ICL. “The Chinese and Indians will continue to buy potash from ICL in the coming years no matter who owns the company.”
ICL union leaders have stepped up their campaign against the proposed merger. Last week they launched a series of protests. The head of the Dead Sea Works union, Armond Lankry, warned that the level of protests will be intensified unless Netanyahu issues a statement clarifying his position. The ICL workers have hired a leading public relations expert to help them with their fight. The union is putting pressure on the Knesset to pass a law that would prevent ICL from falling into foreign hands.
Another union official was quoted as saying that the first thing PotashCorp would do after acquiring ICL would be to transfer activities to the Jordanian side of the Dead Sea, where labor costs are much lower.
The Canadian company currently holds just under 14 percent of ICL. The intensification of the protests against the deal followed a report in the Calcalist economic newspaper in late February that PotashCorp was willing to pay over $20 billion to acquire ICL.
The Israeli government has a say in the matter as a result of a “golden share” it holds in ICL as part of the privatization process that took place in the mid-1990s. The Finance Ministry, as well as the Anti-Trust Authority in the Industry and Trade Ministry, would have to approve any deal. In addition to political opposition environmental groups and Haifa Chemicals, which purchases potash from ICL, have come out strongly against the propose