Over the years Israel has been portrayed as a country rich in human but poor in natural resources. Lack of oil resources in an area of the world which contains more than half of the world's reserves of oil was grim confirmation of the scarcity of natural resources. Some considered investing in the search for black gold as associated with prophetic ideas related to the mention of oil in the Old Testament. This was the rationale behind the many efforts to find oil near the Dead Sea.
In the first 20 years of the country's existence economic progress was made by the sheer efforts its citizens, assisted by international support in the form of grants and gifts.
In 1968 the wily and charismatic then Finance Minister, Pinchas Sapir staged in Jerusalem what was appropriately named as the Millionaire's Conference. He invited the best known global names in industry, trade and finance. As a journalist, in the cigar smoke filled Finance Committee Room, I recognized some of these leaders which included Sigmund Warburg from England and Edmond Rothschild from Geneva. These indeed, were the captains of the global business community.
Finance Minister Sapir unveiled the idea of a corporation whose founders were each asked to invest $100,000. The funds would be invested in projects aimed at expanding Israel's economy.
This conference marked the birth of the Israel Corporation. One of the investors at the time was the late Shoul Eisenberg. A self-made millionaire who escaped from pre-World War II Europe and settled in Japan. In 1968 he was already known as an international business tycoon who could put together projects in tens and hundreds of millions of dollars. Sapir and Eisenberg found a common language. The Finance Minister cajoled Eisenberg to make his Israel his international business headquarters. To entice him Sapir was instrumental in passing what has been known as the Eisenberg Law whereby a 30 year tax holiday for Eisenberg, was promulgated.
In the 1980s the Eisenberg Group acquired control of the Israel Corp. Subsequently many of the original investors withdrew, leaving the chairmanship to Eisenberg.
By 1998 The Israel Corp. had investments in more than 100 businesses. The jewel in the company's crown is its 43% holding in Israel Chemicals, a diversified manufacturer of chemicals and fertilizers which focused on exploiting the natural reserves of rare chemical compounds found in the Dead Sea and the Negev Desert. The company is in the process of implementing a $2.0 billion investment program.
Next month will mark the second anniversary of the death of Shoul Eisenberg. Since his death there has been much discord among the heirs who insisted on cashing in the family's Israeli investments. Shoul Eisenberg's son Erwin, who assumed the chairmanship of the Israel Corporation, had entered into negotiations for the sale of the 43% holding to the Canadian Potash Corporation of Saskatchewan which cast its eyes on the Dead Sea Works, the world's second largest source of potash. However, in an unexpected maneuver the Israeli Ofer Brothers, whose wealth is estimated at $1.5 billion, signed a deal to purchase the Eisenberg 43% share in the Israel Corporation for $330 million.
Assuming that this deal will be done it marks an incredibly high yield from an investment in Israeli natural resources. $100,000 invested in 1968 is returning to its investors as $330 million, free of tax. The Eisenberg Law has less than a year until its lapse and the timing of the sale was indeed propitious. Looking further ahead it is to be assumed that the Ofer brothers are investing with a view of reaping further capital gains. The former Finance Minister Yaakov Neeman, recently returned to his law practice, acting on behalf of the seller undoubtedly was able to convince the Ofer brothers of the very high intrinsic value represented by the Israel Corp.