Despite regulator opposition, Shapir deepens its hold on the Ashdod oil refinery with a 3-year consulting agreement

Despite the fact that the Concentration Committee recommended that the Companies Authority not approve Shapir Engineering's acquisition of control over the Ashdod oil refinery, the refinery's board of directors decided to extend Shapir's consulting agreement for three years, until August 2029.

At the end of July, the committee's position was published, stating that "the acquisition of control over the Ashdod refinery, which is also defined as a concentration factor, will increase the overall market concentration of the Shapir group in a way that will place it at the top of the concentration factors in the Israeli economy." Shapir is not giving up and has requested a meeting with the committee to try to reach understandings regarding the conditions for obtaining a permit.

This fact prevents several parties eyeing the refinery from declaring their interest. Zohar Levy, who holds 13.2% of the refinery's shares through Summit, refused to comment on speculations. In July, a new CEO was appointed to the refinery, Yogev Gavri, who replaced Ronen Yehezkel, who served in the position for only one year.

Shapir holds 10% of the refinery's shares, which it purchased in 2023 upon the refinery's split from the Paz fuel company. Shapir holds options in three tranches that could bring it to a 65% stake by 2028, with 5% of them supposed to be exercised by next week for 42 million shekels to be transferred to Paz, something that will obviously not happen in the absence of a permit. The remaining options are for August 2028, when the consideration (514 million shekels) will go to the company's coffers. The company purchased the first 10% for 156 million shekels, and today they are worth 136 million.

Shapir sold two natural gas distribution companies, the sale of which was a condition for obtaining a permit from the Natural Gas Authority to increase its holdings in Paz. Given the options it holds and the fact that it appointed a director at the Ashdod refinery, Shapir can be seen as a potential controlling shareholder. According to shareholders in the Ashdod refinery, the company might have needed to bring this consulting agreement to the approval of the shareholders' meeting and not settle for board approval. This question may be raised to the Securities Authority to determine whether a meeting is indeed necessary.

The consulting agreement also has significance because it includes, among other things, consulting on the issue of selecting a CEO. The announcement of the agreement's extension appears in the Ashdod refinery reports published yesterday. In the presentation published by the company, the power plant it is working to build on the refinery grounds did not appear, and this also raised eyebrows among shareholders, as the station appeared in the presentation last quarter.

Although it presented a good quarter, in which it doubled its operating cash flow profit from 26 million dollars to 54 million dollars, and a total of 92 million dollars in the first half of the year compared to 59 million in the corresponding half, the refinery's stock reacted with a drop of 7.6%. The company earned 69 million dollars in the second quarter and 24 million dollars in the first half. The improvement came against the backdrop of an increase in refining margins and despite a number of separate malfunctions that caused the company's facilities to operate at 71% capacity in the quarter.

The Ashdod refinery stated: "The consulting agreement is provided in exchange for services they provide to the company, not by virtue of the option." Regarding the presentation and the power plant: "There is no change in strategy. The company continues to promote the power plant. The subject did not appear in the presentation because there is nothing new that has not been reported so far."