Thursday, June 22, 2017

Tel Aviv exchange to see largest IPO on gas field sale - CNBC

A large digital ticker shows financial information outside the
entrance to the Tel Aviv Stock Exchange (TASE) in Tel Aviv, Israel
 on August 4, 2016. Rina Castelnuovo | Bloomberg via Getty Images
Ferry Biedermann; special to
22 JUNE 2017

The Tel Aviv Stock Exchange, TASE, is about to see its largest IPO ever with the sale of part of the Tamar natural gas field by Delek Drilling. A new company, Tamar Petroleum, is to acquire 9.25 percent of the field as well as part of Delek's holding in the smaller Dalit field and will next month issue an offering of about $1.2 billion in stocks and bonds to finance the deal.

Delek's divestment is part of antitrust measures under which the company is to sell its entire 31.3 per cent stake in Tamar, currently the main field from which Israel draws its natural gas. Its partner, Texas-based Noble Energy, will reduce its share in the field from 33 to 25 percent. Last year it sold 3 percent to move towards that goal. This allows both companies to maintain their share in the much larger Leviathan gas field that will come online in the coming years.

Delek is setting up Tamar Petroleum as a Special Purpose Vehicle, SPV, for the acquisition of its share. The sale of the remaining 22.5 percent in Tamar will follow later.

The decision to go for an IPO rather than sell directly to other investors was taken because there are not that many interested parties in the market, estimated Roee Zass of TASC Strategic Consulting.

"We believe there is a small relevant number of entities that has the potential to purchase Tamar rights while Delek and Noble need to sell large stakes. That is the motivation behind going to the market and not sell directly to private or institutional investors."

Pricing was another reason, he said. Noble sold a 3 percent stake last year to Israel's Harel Insurance Investments and Financial Services, for $369 million based on the field's pre-tax valuation of $12.3 billion. "I'm guessing Delek do not want to go down from this level, and that is another reason to go to the IPO."

The antitrust measures are part of Israel's natural gas framework agreement between the government, regulators and the companies that was subject to prolonged political and legal wrangling. Disagreements over Delek and Noble's dominant position delayed development of the large Leviathan field for years.

The new Tamar Petroleum will be large enough to be listed on the TASE's flagship TA-35 index. The TASE has seen an increasing number of IPO's this year, with eight so far, the most since 2011. Drone company Aeronautics recently raised some $130 million, in what is the largest IPO so far this year on the TASE.