Israel is moving closer to rejecting the proposed $4.2 billion acquisition of Israeli shipping line ZIM by Germany’s Hapag-Lloyd and private equity firm FIMI, with several government agencies expected to oppose the transaction.
A key meeting of eight government bodies that must submit their positions on the proposed takeover has been postponed by a month and is now scheduled for September 9. Reports indicate that a majority of the agencies are likely to recommend that the deal not be approved.
Following the meeting, Hapag-Lloyd and FIMI are expected to receive a final hearing before the Government Companies Authority, where they can present their arguments and seek to influence the final decision.
Shipping Authority Recommends Rejection
Israel’s Shipping and Ports Authority Director Tzachi Radker has submitted a second review of the transaction and again recommended that the government reject it. The authority is regarded as the principal professional body advising government agencies involved in the approval process.
Under the deal signed in February, Hapag-Lloyd and FIMI would acquire ZIM for approximately $4.2 billion.
The buyers have argued that the transaction would strengthen Israel’s maritime sector by creating a new Israeli ZIM subsidiary dedicated to the domestic market. The proposed company would operate 16 vessels, compared with the 11 vessels currently required under Israel’s “golden share” arrangement.
The new ZIM Israel would also employ around 200 workers and establish a technology centre expected to employ 250-300 people. Hapag-Lloyd and FIMI have pledged to retain Israeli third-party shipping agents, maintain regional services, and guarantee employment for existing workers for 10 years.
The buyers have further argued that the new Israeli company would have no debt, compared with ZIM’s current debt burden of about $2.9 billion, while gaining access to Hapag-Lloyd’s global shipping network.
Concerns Over Foreign Control
Despite the commitments, the Shipping and Ports Authority maintains that the proposed structure would leave the Israeli operation dependent on a foreign-controlled entity.
Radker said the additional information submitted by the buyers had failed to resolve fundamental concerns over effective control, economic and operational independence, long-term sustainability and Israel’s national interests protected by the golden share.
The authority acknowledged positive elements in the proposal, including continued employment for Israeli seafarers, training programmes for additional maritime workers and commitments relating to independent agreements with suppliers and ports.
However, it argued that key strategic capabilities would remain under Hapag-Lloyd’s control, including vessel capacity, access to international shipping networks, key markets, infrastructure and commercial decision-making.
The authority’s central concern is that ZIM Israel could be separated from ZIM’s existing international network, which would remain under Hapag-Lloyd.
Regulators also fear that transforming ZIM from a major global shipping company into a smaller Israel-focused operator could make it more difficult for the company to satisfy the conditions attached to the state’s golden share.
Buyers Challenge Regulatory Process
Hapag-Lloyd and FIMI have strongly rejected the regulators’ concerns and criticised the process leading to the expected recommendation against the deal.
The buyers claim they have had only limited opportunities to present their case, citing three short meetings with representatives of the Finance Ministry, Defense Ministry and Shipping and Ports Authority.
They have also accused opponents of the transaction, including former ZIM executives behind a rival bid and representatives of the workers’ committee, of attempting to block the acquisition through government channels.
Hapag-Lloyd and FIMI have submitted supporting assessments from Ernst & Young, Boston Consulting Group (BCG) and former Shipping and Ports Authority director Yigal Maor. They have also responded to 120 of 174 questions raised by government agencies and submitted around 600 pages of supporting documents.
FIMI said the Shipping and Ports Authority’s assessment was based on “fundamentally incorrect factual assumptions”. The fund maintains that ZIM Israel would operate as an independent Israeli company, controlling its core operations, strategy and future growth.
Government Decision Expected in September
The Defense, Economy and Agriculture ministries, along with the Transportation Ministry, are currently opposed to the transaction. The Transportation Ministry’s position is particularly significant because it relies heavily on the assessment of the Shipping and Ports Authority.
The Finance Ministry and National Security Council have yet to formally submit their positions, although opposition from the Finance Ministry’s Accountant General division has reportedly emerged.
The final decision is expected after the September 9 meeting and the subsequent hearing before the Government Companies Authority.
If the government rejects the transaction, FIMI is reportedly unlikely to challenge the state in court, while Hapag-Lloyd may consider legal action in an effort to keep the deal alive. The German carrier could also hope that a future Israeli government after the next elections will revisit the proposed takeover.
The dispute highlights the strategic importance of ZIM to Israel and the government’s concerns over maintaining national maritime capacity, fleet availability and operational independence while attracting international investment into the country’s shipping sector.
