Slightly less than a month surprising the capital market, Hagag Group Real Estate Development Ltd. (TASE: HGG), controlled by Yehuda Eido Hagag and Yitzhak Hagag, has completed the purchase of the controlling stake in Bazan (Oil Refineries) (TASE: ORL), which owns the oil refinery in Haifa Bay. Hagag Group has bought 16.7% of Bazan from Israel Corporation (TASE: ILCO), controlled by Idan Ofer, for NIS 555 million, after discounting the purchased shares’ proportion of the NIS 60 million dividend declared by Bazan but not yet paid.
The deal leaves Israel Corporation with a 7.3% stake in Bazan, on which the qualified investors to whom Israel Corporation sold 9% of Bazan last November have an option. The price in that deal was NIS 0.91 per share, and it took Israel Corporation’s holding in Bazan from 33% to 24%. At that time, Israel Corporation estimated that it would post a net loss of NIS 269 million on the deal. The current deal with Hagag Group means that Israel Corporation is surrendering control of Bazan fifteen years after buying it from the state.
Hagag Group has given Israel Petrochemical Enterprises (TASE: PTCH), which controls Bazan together with Israel Corporation, a put option to sell Hagag Group its 13.5% stake in the company. If the option is exercised, Hagag Group’s stake in Bazan will rise to 30%. The price that Hagag Group is paying Israel Corporation is about 25% below the current stock market price.
Bazan’s market cap at the close of trading yesterday was NIS 4.39 billion. Since the beginning of this year, its share price has recovered sharply, rising 52%, but it is still not back to where it was before the outbreak of the coronavirus pandemic. Over the past three years, Bazan’s share price has fallen 23%.
Bazan refines crude oil, and produces and sells fuels, polymers, and other chemicals. It has a 2,140 dunam (535 acre) site in Haifa Bay leased from the state for eighty years. The potential that Hagag Group sees in Bazan lies in the future evacuation of the site, which has become more likely after the government decision in March last year to end petrochemicals activity in Haifa Bay and to promote a plan for the development of the area within a decade.
Hagag Group deals in residential, office, and commercial real estate, mainly in Tel Aviv. It is also active in hotels, and recently decided to enter the sheltered housing market.
The company said in a statement last night, “We are proud to be joining the Bazan group, one of the oldest and most important companies in Israel. We intend to act in accordance with the government’s decision on the future of the petrochemicals plants in Haifa Bay, for the benefit of the company’s shareholders, employees, and partners. “
Published by Globes, Israel business news – en.globes.co.il – on April 18, 2022.
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