Shapir Engineering Forgoes Stake in Ashdod Refinery Amid Regulatory Hurdles

Shapir Engineering has decided not to exercise its option to purchase a 4.99% stake in the Ashdod Oil Refinery from Paz Oil Company. Paz is expected to offer these shares to the highest bidder. Current shareholders Zohar Levy and Summit, who collectively own 13% of the refinery, are considered the leading candidates to acquire the shares, though other interested parties exist.

Shapir has faced significant obstacles in obtaining regulatory approval for control of the refinery. The Concentration Committee recommended against Shapir increasing its holdings, citing concerns that control of the refinery would place Shapir among the most concentrated entities in the Israeli economy. Additionally, the Government Companies Authority informed Shapir that it would not approve an increased stake until Shapir completes the sale of its two natural gas distribution licenses.

The sale of these licenses for NIS 230 million to an infrastructure firm, agreed upon in April, has not yet been finalized. This sale is a prerequisite for Shapir to increase its shareholding, as Shapir is currently in violation of the Natural Gas Law with the Gas Authority. Shapir had long aimed to acquire a significant stake in the refinery, entering into an agreement to gain control when Paz was compelled to divest its holdings, contingent on regulatory approval.

Shapir previously acquired a 10% stake in the refinery for NIS 156 million and secured three options for future stake increases, subject to approvals. The first option involved purchasing 4.9% from Paz at a valuation of NIS 1.55 billion or the average share price over the last 90 trading days. The other two options allow Shapir to increase its stake to 45.1% or 65% through share allocations. Control of the refinery requires a 20% or greater holding, suggesting Shapir may not pursue further increases if control approval is denied.