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Paz selling bitumen unit Pazkar

Paz Oil Company Ltd. (TASE:PZOL) reported today that it had signed a non-binding memorandum of understanding (MoU) for the sale of its Pazkar subsidiary to Inrom Construction Industries (TASE: INRM) for NIS 135 million. Inrom will begin due diligence for Pazkar in the coming days, and the two companies expect to sign a detailed agreement within three months. Completion of the deal is subject to various conditions and approvals.

Pazkar manufactures and markets insulation and waterproofing products for the construction and infrastructure sectors. Among other things, the company sells bitumen sheets, bitumen-based waterproofing membrane, polyurethane-based waterproofing membrane, and acrylic membranes. Pazkar’s plant is located in the Alon Tavor industrial zone in Afula. Inrom manufactures, markets, and distributes products and solutions, mainly for the construction and renovation sectors, through the Ytong and Carmit Mister Fix companies and the Nirlat paint company.

The two companies involved in the deal have no controlling shareholder; they are held mainly by investment institutions. Paz’s share price responded to the reports with an increase, after declining slightly over the past year, putting its market cap down to NIS 4.9 billion, while Inrom’s share price rose 42%, pushing its market cap up to NIS 1.6 billion.

Meanwhile Paz reported that its refinery in Ashdod cost the company a NIS 55-65 million operating loss in in the fourth quarter of 2019 (the adjusted operating loss will be NIS 25 million), according to initial estimates by Paz.

Paz’s report to the Tel Aviv Stock Exchange indicates that the increase in the price of oil in the final weeks of 2019 caused the company to report a loss due to the hedges on Paz’s oil inventory. Furthermore, the company’s fourth quarter results were negatively affected by the shutdown of facilities at the oil refinery for the purpose of renewal and installation of the Cat Cooler facility and “rejection of export cargoes caused by the difficult weather conditions prevailing in the last week of 2019,” Paz stated.

New investment in GenCell

Paz also announced today that its board of directors had approved a $10 million (NIS 35 million) investment in Israeli company GenCell for 4-5% of GenCell’s shares (the final allocation has not yet been determined). The investment is part of Paz’s policy investing in sectors tangential to its activity, mainly in future energy solutions (alternative and environmentally friendly energy), and in energy innovation projects.

GenCell develops products for producing clean and cheap energy for various needs and uses, including vehicle propulsion. The company manufactures fuel cells that operate on hydrogen produced from ammonia. Paz says that this production process is designed to be economical, cheap, and non-polluting.

GenCell, founded in 2011, is held by several Israel and foreign investors. The company has registered quite a few patents in its spheres of activity. Some of its employees are scientists formerly employed in the Russian, US, and European space programs. The company’s chairman is entrepreneur and businessperson Benny Landa.

Paz believes that the products to be developed by GenCell can be installed in Paz’s filling stations, mainly for hydrogen-powered vehicles. Paz adds, “The investment is contingent on the signing of a detailed investment agreement, conducting additional necessary checks, and obtained approvals, if any are required.” If Paz decides to make the investment, it will be entitled to appoint one director to GenCell’s board of directors.

Paz went through several upheavals over the past year, among other things the appointment of former Cellcom CEO Nir Sztern as its CEO in place of Yona Fogel, who resigned after 12 years as CEO. Fogel’s resignation followed disputes with chairman Avraham Bigger, who was appointed to his post last April.

Following the appointment of Sztern, who took up his position in the past few days, several senior executives at Paz resigned, including Ashdod Oil Refinery CEO Malachi Alper, VP retail operations Yoram Eyal, and Pazgas CEO Amir Erez.

Full disclosure: Avraham Bigger is a consultant to the “Globes” board of directors.

Published by Globes, Israel business news – – on January 23, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

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