Israel Chemicals Ltd. - Company Profile, Information, Business Description, History, Background Information on Israel Chemicals Ltd.

Millenium Tower
23 Aranha Street
Tel-Aviv 61070

Company Perspectives:

ICL has unique access to nature's gifts. In Israel, it has exclusive concessions from the State of Israel to extract minerals from the virtually inexhaustible Dead Sea and holds concessions to mine the rich Negev Desert. The Dead Sea is a vast source of potash, bromine, salt, magnesium and magnesium chloride, and the Negev Desert is mined for phosphates and limestone. Furthermore, ICL holds concessions for potash mining in Spain and England.

History of Israel Chemicals Ltd.

Israel Chemicals Ltd. (ICL) is one of the world's leading producers of potash, bromine, and other mineral and chemical compounds. The company accounts for approximately 11 percent of total world potash production and 35 percent of world bromine production. It also produces more than 9 percent of the primary magnesium consumed by the markets of the West. More than 60 percent of the company's production come from its concessions in the Dead Sea (potash, bromine, salt, magnesium, and magnesium chloride) and the Negev Desert (phosphates and limestone). The company also operates potash mining concessions in England through subsidiary Cleveland Potash and in Spain through subsidiary Iberpotash, as well as maintaining manufacturing facilities in the United States, Chile, France, the Netherlands, Germany, China, and elsewhere. International sales represent more than 90 percent of the company's total sales. Formerly owned by the Israeli government, ICL has been listed on the Tel Aviv Stock Exchange since the early 1990s. The majority of the company's stock is held, however, by the Ofer Group, which, through its investment company Israel Corporation, holds 52 percent of ICL's stock.

Government-Owned Mineral Concern in the 1970s

Israel Chemicals Ltd. stemmed from the mid-1970s combination of two important areas of Israel mineral production, that of phosphates from the Negev Desert and potash and other minerals from the rich Dead Sea basin. Negev Phosphates had been founded in 1952 for the purpose of mining phosphate rock from the Negev Desert. In 1966, another company was formed, Arad Chemical, which specialized in the production of phosphoric acid. Both companies were owned by the Israeli government, which formed a new holding company, Israel Chemicals Ltd., for these and other government-owned mineral companies operating in the Negev Desert. In 1975, ICL merged Negev Phosphates and Arad Chemical into a single company under the Negev Phosphates name. That year marked the consolidation of much of Israel's mineral production under the ICL umbrella. A significant addition to ICL was Dead Sea Works Ltd., one of the country's oldest mineral operations, predating the formation of the Israeli state itself.

Moshe Novomeysky had been an engineer in Siberia before emigrating to Palestine in the 1920s. There, Novomeysky recognized the vast mineral potential of the Dead Sea, particularly the possibility of producing bromine and potash (a potassium derivative) present in the Dead Sea water. Novomeysky was granted a concession for processing chemicals from the Dead Sea by the British authorities in 1927. Novomeysky founded Palestine Potash Ltd. in that year and began construction of a plant in Kalia, along the Dead Sea's northern shore.

Palestine Potash began producing bromine in 1931. The following year, the company launched potash production as well. By 1934, seeking expansion, Novomeysky decided to establish a new, larger plant in Sdom, on the southern shore of the Dead Sea. By 1936, when that plant began production, the company was turning out 80,000 tons of potash per year.

During the Israeli War of Independence, the Kalil site was destroyed. Production at the Sdom site was also interrupted and was not to resume again until 1954. By then, the company had taken on a new name, Dead Sea Works Ltd., and had come under the control of the Israeli government. The company's bromine production was placed under subsidiary Dead Sea Bromine. By the end of 1954, potash production had risen to more than 100,000 tons per year. Nevertheless, this was a relatively small scale of production, leaving the company operating at a loss.

In 1955, new managing director Moderchai Makleff, former General and Chief of Staff of the Israeli army, launched Dead Sea Works on a major expansion drive. Backed by the Israeli government, the Dead Sea Works expansion involved building a 20-kilometer dam across the Dead Sea, creating an evaporation bed of more than 100 square kilometers. Accompanying the construction of the dam was the development of a modern plant that produced potash using a hot crystallization process. This expansion enabled the company to boost its production to more than 400,000 tons per year in the early 1960s, more than 800,000 tons by the end of the decade, and more than 1.2 million tons by the early 1970s.

By then, Dead Sea Works had expanded into a new area, that of magnesium production, a byproduct of the potash production process. In 1970, the company founded a new enterprise, Dead Sea Periclase Ltd., which used brine from Dead Sea Works for its magnesium production. In 1975, Dead Sea Works and Dead Sea Periclase were merged into the newly expanded ICL.

ICL grew strongly in the late 1970s and early 1980s. In 1977, the company created a new subsidiary, Rotem, which began production of fertilizers and phosporic acid using phosphate rock mined from the Negev. That same year, ICL, in its first international move, acquired Germany specialty chemicals producer Giulini Chemie GmbH. Founded in 1823 in order to produce sulfuric acid from sulfur mined in Italy, that company had expanded into other chemical operations at the turn of the century, adding phosphate fertilizers, phosporic acid, and other compounds. In the second half of the 20th century, Giulini had continued its diversification, adding products ranging from pharmaceuticals to food additives to specialty chemicals used in the paper and footwear industries.

Meanwhile, Dead Sea Works, in conjunction with IMI (Tami) Institute for Research and Development, a government-owned body founded in 1964 and itself placed under ICL in 1975, had begun work on developing a new method for extracting potash using a cold crystallization process. That effort paid off in 1980, and the company added new production facilities for the process. Initial production reached 400,000 tons per year, a figure that doubled by the middle of the decade.

Continuing its internationalization, ICL completed a new acquisition in 1982 when it acquired Amsterdam Fertilizers, or Amfert. The acquisition helped boost ICL's position in the European fertilizer market, giving it manufacturing capacity in the Netherlands and Germany as well as sales offices in France, Spain, and the United Kingdom.

Raw Materials to Finished Products Giant in the 1990s

During the 1980s, ICL began a shift from its position as a raw materials producer toward becoming a more vertically integrated producer of end products. As part of that movement, the company began making a series of new acquisitions designed to diversify its operation into related areas. Such was the case with its 1990 acquisition of Rami Ceramics, which produced specialty ceramics for the steel industry from two plants in Acre and Nazareth.

Yet ICL was also preparing for a still bigger change--that of becoming a private company. Calls for the privatization of Israel's industries had been building since the 1980s. ICL, as one of the country's largest government-owned companies, became a primary target for the privatization drive, particularly as Israel struggled through a currency crisis at the beginning of the 1990s. The privatization of the company nonetheless remained a contentious issue.

As a run-up to the privatization, however, ICL began to restructure parts of its operations. In 1989, Amfert was placed under phosphates group Rotem, which was then renamed Rotem Amfert Group. Then, in 1991, Rotem Amfert absorbed the Negev Phosphates operation, renaming itself Rotem Amfert Negev Ltd. and taking over all of ICL's phosphates production.

That same year, ICL launched an ambitious, $900 million, five-year investment program designed to step up phosphate production from 2.1 million tons to 2.5 million tons and bromine and bromine compound capacity to 200,000 tons per year. The company also began construction on a number of new manufacturing facilities, including a potassium sulfate facility capable of producing 150,000 tons per year, a new 100,000 tons-per-year magnesium chloride pellet production facility, a phosphate plant capable of production levels of one million tons per year, and an NPL fertilizer plant with a capacity of 50,000 tons per year.

ICL's public listing finally went through in 1992, as the Israeli government placed some 25 percent of the company on the Tel Aviv Stock Exchange. Control of the company and its decisions remained with the Israeli government, which considered ICL of vital interest to the Israeli state. At the same time, however, the government floated two ICL subsidiaries, Dead Sea Works and Fertilizers & Chemicals Ltd. Both remained, however, majority controlled by ICL.

ICL continued to expand through acquisitions and by entering new business areas. In 1992, subsidiary Giulini Chemie purchased German pharmaceutical company Philopharm, the maker of a product for the treatment of gastric disorders. Meanwhile, Rotem Amfert Negev entered a joint-venture with Chile's SQM to form NutriSi, marketing various fertilizer products that included mono-potassium phosphate (MKP) to the European market. The joint-venture, begun in 1993, led Rotem Amfert Negev to inaugurate a new MKP production plant the following year. Rotem Amfert Negev continued to expand that year, acquiring France's Penngar, which produced detergents for the dairy industry.

Public Chemicals Leader in the 21st Century

In 1994, the Israeli government announced its intention to float an additional 25 percent of ICL's shares, reducing its holding to below 50 percent. The government also proposed to list ICL's shares on the New York Stock Exchange but dropped that plan before the public offering in February 1995. The new offering turned over nearly 25 percent of the company to investment firm Israel Corporation, headed by Saul Eisenberg, which was also granted an option to acquire an additional 17 percent of ICL by 1997.

As a further step toward its full privatization, the company continued restructuring in 1995, regrouping ICL into three main groups: Dead Sea Works, which took over the company's Dead Sea minerals, pharmaceuticals, cosmetics, and energy products; Dead Sea Bromine, which was split off from Dead Sea Works to form the core of a new Bromine business unit that also incorporated Dead Sea Periclase and Rami Ceramics; and a new company, Rotem, which not only took over Rotem Amfert Negev but also Giulini Chemie and various other companies and businesses, including much of the ICL's international holdings.

ICL continued its acquisitions into the second half of the decade. In 1995, the company acquired U.S.-based Clearon Corp, which specialized in water treatment products. In 1996, Rotem strengthened its position in the German phosphates market through the purchase of BK Ladenburg Gesellschaft für Chemische Erzeugnisse. Founded in 1967, that company had come under control of Hoechst AG in 1990, producing phosphates for food additives, detergents, water treatments, and other markets. Following that acquisition, Rotem regrouped its German operations, merging BK Ladenburg with Giulini Chemie, creating BK Giulini.

Israel Corporation exercised its option to acquire a further stake in ICL, increasing its holding to 41.9 percent. The Israeli government, which by then had reduced its stake in ICL to just 31.5 percent, at last completed the privatization of the company in 1999 when it placed its entire holding in the company on the Tel Aviv Stock Exchange. Israel Corporation took that opportunity to increase its own holding in ICL to 52 percent--beating out Canadian rival Potash Corporation of Saskatchewan (PCS), which had been pursuing its international expansion at the end of the 1990s.

By then, ICL had itself outrun PCS when it acquired, through Dead Sea Works, Spanish potash company Grupo Potasas, based in Barcelona and the largest potash producer in Spain. That company was then renamed as Iberpotash. Dead Sea Works was expanding elsewhere as well, constructing a $450 million plant in China that was expected to produce up to 800,000 tons of potash per year using ICL's cold crystallization process. Dead Sea Works had also launched itself in a new direction, founding Dead Sea Magnesium and investing some $420 million to construct a magnesium production facility. The company guessed--correctly--that the automobile industry would increasingly turn to the use of magnesium alloys, which were both lightweight and less environmentally aggressive than traditional metals.

In 1999, ICL began a program of de-listing its publicly listed subsidiaries, beginning with Fertilizers & Chemicals Ltd. The following year, ICL reacquired all the outstanding shares of Dead Sea Works, Dead Sea Bromine, and Dead Sea Periclase. In the meantime, ICL itself had come under new ownership when Ofer Brothers Group, the largest privately owned company in Israel, acquired a controlling stake in Israel Corporation for $330 million--beating out a rival bid by PCS.

ICL's expansion continued into the next decade. In 2000, Rotem, through Rotem Amfert Negev, purchased Turkish phosphate producer Opal, which specialized in products for the feed market. That subsidiary was renamed as Rotem Turkey. Meanwhile, the company began shedding a number of non-core activities, including its stake in Dead Sea Laboratories, which marketed cosmetics and skin-care products under the Ahava brand name, sold off in 2001. In that year, the company also combined the marketing operations of Dead Sea Works and Rotem Amfert Negev, a move expected to cut costs while increasing service to customers.

In 2002, ICL enhanced its international profile with the purchase of Cleveland Potash Ltd., which operated potash mines in the United Kingdom, paying $45 million to Anglo American Plc. The purchase helped establish ICL as a major European potash producer and one of the largest in the world. Following that acquisition, ICL embarked on a new restructuring. The company created a new business unit, ICL Fertlizers, which combined nearly all of the company's fertilizer operations, including Dead Sea Works, Iberpotash, and Cleveland Potash, as well as Rotem and Fertilizers & Chemicals. Backed by its exclusive concession to the Dead Sea's minerals, but with a growing array of international operations, ICL had established itself as one of the world's leading specialty chemicals producers.

Principal Subsidiaries: Dead Sea Works Ltd.; Rotem Amfert Negev Ltd. (Netherlands); Cleveland Potash Ltd. (United Kingdom); Iberpotash S.A. (Spain); BK Giulini Chemie GmbH & Co. (Germany); Dead Sea Periclase Ltd.; Dead Sea Bromine Group; IDE Technologies Ltd. (50%); SQM (Chile).

Principal Competitors: IMC Global Inc.; Avecia Group plc; Agrium Inc.; Kali und Salz AG.


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