The state and Israel Corp. have compromised in the Supreme Court on the transferability restriction.
Yesterday evening, a settlement was reached in the Supreme Court on the government’s golden share in Israel Corporation (TASE: ILCO) subsidiary Zim Integrated Shipping Services Ltd.. Under the settlement, the ruling of the Haifa District Court will be set aside, and it will be stipulated that if Israel Corporation seeks to sell 24-35% of the company and the state objects, then the sides will return to the court to resolve the dispute.
The state had demanded that in these circumstances the sale should be conditional on its consent, while Zim sought the removal of the restrictions on the transferability of its shares.
The question of the golden share in Zim reached the Supreme Court after the state appealed against the decision of the Haifa District Court allowing Israel Corporation to sell its holdings in Zim in the future without the need first to obtain the state’s consent.
Under the debt arrangement in Zim, Israel Corporation will inject $200 million into the company, and will be diluted to a 32% stake (compared with 99% today). Israel Corporation has been making the arrangement conditional on the removal of restrictions on any future sale of shares, so that it will be able to sell its stake freely to a foreign entity.
Israel Corporation’s insistence is explicable among other things by its experience with Potash Corporation of Saskatchewan, when the state prevented the sale of Israel Corporation’s stake in Israel Chemicals Ltd.(TASE: ICL) to the Canadian company. Israel Corporation argues that, unless the transferability restriction is removed, its shares in Zim will be worth less.
The transferability restriction is one of the terms of the state’s special share in Zim, known as the golden share, which states that control of Zim or a 24% stake in the company cannot be sold without the state’s consent. The purpose of this provision is to prevent Zim being sold to entities hostile to Israel.
The state, through Ministry of Finance director-general Yael Andorn, and with the support of the Sea Officers Union, decided to oppose cancellation of the transferability restriction, on the grounds that it would be compromising a vital interest of the state. Economist Dr. Zeev Rotem warned in an interview with “Globes” that in the future the state would not be able to ensure vital supplies by sea in time of war if it were to relinquish the restrictions on Zim shares.
Published by Globes [online], Israel business news – www.globes-online.com