In October 2014 the Israeli government’s social-economic cabinet approved a plan to privatize a wide-ranging group of government-owned companies. The plan, which calls for the privatizations of nearly 20 companies over the next three years, is expected to raise approximately $4.2bn for the Israeli economy. We beleive this will provide significant opportunities of international buyers.
Earlier this month the Israeli government’s social-economic cabinet approved a plan to privatize a wide ranging group of government-owned companies. The plan, which calls for the privatizations of nearly 20 companies over the next three years, is expected to raise approximately $4.2 billion for the Israeli economy. While significant political and commercial hurdles may challenge or slow implementation of parts of the plan, the government appears to be committed to the privatizations.
Pursuant to the plan announced by the social economic cabinet many of the companies will be fully privatized. For more strategic or critical services companies such as the national electric company, water company, and Israel Natural Gas Lines, the government plans to sell off stakes ranging from 25% to 49%, while retaining control stakes for itself. The government intends to execute the privatizations both through stock market listings and direct sale auction processes.
The initiative—similar to privatizations across Western markets—comes at a time when the government is seeking new revenue sources to close budget gaps. According to Finance Minister Yair Lapid, it is also intended to make “government companies more efficient, successful and independent, another step in ending the politicization of these companies and reducing corruption.” During a previous stint as Finance Minister, Prime Minister Netanyahu oversaw an earlier wave of privatizations which ultimately included ELAL, Oil Refineries and phone company Bezeq.
In order to appease labor groups within these enterprises, the government plan establishes a formula for offering shares to employees. Under the formula, employees in the Israel Post for example will be offered 10% of shares in the company at a discount of 30%. Nonetheless the privatizations are expected to face vehement opposition by the Histadrut (General Federation of Labor in Israel).
The first company to be privatized as part of the current initiative will be Israel Military Industries, a manufacturer of arms and munitions. The government has reportedly invited several global investment banks to pitch for the mandate, which is planned to be completed in 2015 and is expected to value the company at 2 billion NIS (approx. $540 mil).
Other companies that are expected to be included in the privatizations are set out below.
Click here to view the table.