Ampal-American Israel Corporation

Ampal-American Israel Corporation operated as a U.S. company whose investments and holdings were concentrated in Israel and Israel-related businesses.[2] A 1987 archival biography described it as an American Stock Exchange company investing in Israeli businesses, while a May 2014 stock listing placed it on NASDAQ under the ticker symbol AMPL and classified it as a holding company.[8][1] A 1971 annual guide also listed Ampal among the Zionist and pro-Israel organizations and institutions associated with the U.S. Jewish community.[9]

Across different periods, the company's portfolio included energy distribution through East Mediterranean Gas, chemical logistics through Gadot Chemical Terminals and Tankers, wind energy through a 50% stake in Global Wind Energy with Clal Energy, a 25% stake in a sugar-cane ethanol project in Colombia, and interests in real estate, capital markets, leisure activities, high technology, and communications.[10][2] By 2000, its principal investment focus was described as high technology and communications.[2] Bank Hapoalim, Ampal's founding institution, was listed as holding 36.0% of both Ampal-American Israel Corporation and Ampal (Israel) Ltd.[3] An archival collection documenting the corporation is held by the American Jewish Historical Society under call number MS-NAT.A47P1.[11]

Bank Hapoalim's directors established the American-Palestine Trading Corporation, or AMPAL, in 1941 as a subsidiary intended to raise funds for investment in Palestinian industry and commerce.[3] Avraham Dickenstein traveled to the United States to establish the corporation during wartime and secured an initial $50,000; by 1946, AMPAL's capital had reached $2 million.[3] The company predated Israeli statehood and became particularly active following Israel's establishment in 1948.[3]

Among its early contributions, AMPAL helped secure investments in Israeli industry and raised capital for municipal development.[3] In 1948, it began leasing ships to transport supplies and goods to Israeli manufacturers, an effort from which the independent American-Israel Line later developed.[3] During 1950, AMPAL reported an increase in its credit facilities from $8.5 million to $18 million. The same study said the gross assets of its parent company rose from $10.3 million on January 31, 1950, to more than $20 million by its stated endpoint in 1951.[12] Its projects included hotels in Tel Aviv and Beersheba, a plywood-manufacturing project, a glassware factory in the Negev, canneries in the Galilee, an oil-company investment, and purchase financing; most were undertaken with partner organizations.[12]

A Securities and Exchange Commission notice dated February 5, 1965, documented Ampal's application under sections 6(c) and 17(d) of the Investment Company Act of 1940 and Rule 17d-1.[13] At the time, Ampal was headquartered at 17 East 71st Street, New York, and sought authorization for itself and its affiliate Israel Development Corp. to make loans to the Jewish Agency for Israel during Ampal's fiscal year ending January 31, 1966.[13]

Ampal owned approximately 8.6% of the outstanding voting securities of Israel Development Corp., making the two companies affiliated persons under the Act; Israel Development Corp. was a registered, closed-end, nondiversified investment company.[13] The proposed transaction involved a $5 million loan from Ampal to the Jewish Agency for Israel at 8.5% annual interest on unpaid balances, with a maturity of two years or more and semiannual payments.[13] The notice characterized the Jewish Agency as the principal instrument for the resettlement and rehabilitation of immigrants in Israel and said it was borrowing in anticipation of future receipts from charitable contributions and similar sources.[13]

A corporate history of Bank Hapoalim states that, during the Israeli bank-share crisis, the bank bought and sold large amounts of AMPAL stock as part of activity that falsely inflated share values. It also reports that Ephraim Reiner, AMPAL's president in 1986, resigned two months after a government commission issued its report on the collapse.[3]

The Steinmetz family acquired control of Ampal from Bank Hapoalim in the 1990s, initially obtaining 27% of the shares and subsequently increasing its holdings to approximately 42–43%.[14] By June 30, 1998, the family held 10.2 million of Ampal's 23.8 million ordinary shares, representing 42.76% of capital and voting rights, with the family-owned Rebar Financial Corporation purchasing additional shares through mid-1998.[14] In February 2002, Yosef (Yossi) Maiman acquired control of Ampal from the Steinmetz family.[15]

Maiman stated in January 2011 that when he invested in Ampal about a decade earlier, it held approximately 70 high-technology investments, generally representing stakes of 1–2%.[16] Under his management, the company was refocused on basic industries, particularly energy, chemicals, petrochemicals, and communications, and he said the value of its assets rose from approximately $300 million to $1.4 billion over the decade.[16] In 1998, ahead of that transition, Ampal's portfolio had included 42.5% of Ophir Holdings, 21.5% of Granite Hacarmel, 50% of Etz VeNi'ar, 85% of the Paradise mattress plant, stakes in the Renaissance and TriNet venture-capital funds, and interests in MIRS Communications.[17]

Ampal acquired a minority stake in MIRS Communications from Motorola in January 1998 for $110 million, then sold 8% of the shares three months later to an investor group that included the Steinmetz family, Bank Hapoalim, FIMI, Israel Discount Bank, and then-CEO Yehoshua (Shuki) Gleitman.[18] In August 2005, Ampal sold its remaining 33% stake in MIRS to Motorola for $89 million—$67 million in cash and $22 million in promised dividends—recording a $4.1 million loss; $73.6 million of the proceeds was allocated to repay bank debt.[19] Its high-technology portfolio included a $12.8 million cumulative investment in XACCT Technologies, representing a 16.9% stake at the end of 2002, as well as $700,000 in PowerDsine, $700,000 in Cerel Ceramics Technologies, and $1.3 million in Shellcase.[20]

A central modern investment for Ampal was its 12.5% stake in East Mediterranean Gas Company (EMG), an Israeli-Egyptian venture established to supply Egyptian natural gas to Israel.[5] Under a diplomatic agreement reached by Israel and Egypt in 2005, EMG undertook to supply Israel with 7 billion cubic meters of natural gas annually for 20 years; that year, EMG also signed a 15-year gas-supply agreement with the Israel Electric Corporation.[5] Israel came to rely on Egypt for approximately 40% of its natural gas and viewed the arrangement as an important component of the peace relationship between the two countries.[21]

Ampal built its EMG position through transactions with entities controlled by Maiman. In 2006, Merhav sold Ampal half of Maiman's EMG holdings, representing 12.5% of the consortium, for $258.3 million, including $150 million in cash.[5] In October 2007, Maiman sold an additional 4.3% EMG stake to institutional investors for $95 million in cash and sold another 12.5% of his EMG shares to Ampal for $148 million in cash plus $111 million in Ampal stock valued at $4.75 per share.[5] The total reported investment in the Egyptian gas line was $550 million, with Maiman responsible for approximately 25%, or $137 million.[5]

Beyond EMG, Ampal operated Gadot Chemicals, which purchased, marketed, distributed, and shipped chemicals, and held a 50% stake in Global Wind Energy with Clal Energy and a 25% stake in a sugar-cane ethanol project in Colombia.[10] Ampal had also acquired internet provider 012 Smile from Shaul Elovitch for NIS 1.2 billion and sold it to Partner Communications for NIS 1.5 billion.[10]

Repeated terrorist attacks on the Sinai pipeline following the 2011 Egyptian revolution severely damaged Ampal's financial position.[6][7] Egypt later terminated its 20-year gas agreement with Israel, citing nonpayment, while Israel maintained that payments had been halted because the attacks had disrupted deliveries.[21] Ampal filed a request for international arbitration against the Egyptian government in connection with its EMG investment.[22]

In May 2012, Ampal wrote off its entire 12.5% investment in East Mediterranean Gas, recording $260.4 million in charges related to the stake in the first quarter of 2012 and a quarterly net loss of $215 million, compared with net income of $17.2 million in the same quarter a year earlier.[6] In the third quarter of 2011, Ampal had reported revenue of $165.4 million, up 34% year-on-year, while Gadot Chemicals generated $139 million in revenue. Despite those gains, a $20.3 million loss attributable to shareholders had already emerged, mainly because of a write-down of the Egyptian gas investment.[10]

By December 2011, Ampal's bond debt, including principal and interest, stood at NIS 1.27 billion, approximately $340 million, with payment obligations of $40 million in 2012, $40 million in 2013, and $15 million in interest.[10] Management sought a two-year deferral of principal and a deferral of NIS 116.7 million in interest, offering bondholders higher interest as compensation.[10] The proposed restructuring divided institutional investors: some demanded personal guarantees from Maiman and stock options, while others threatened liquidation, arguing that Ampal's cash and liquid assets could provide more compensation than the bonds' market value.[10]

Ampal's stake in Gadot Chemical Terminals and Tankers had been financed with a NIS 320 million loan from Israel Discount Bank secured by Ampal's Gadot shares.[23] After Ampal filed for Chapter 11 protection in the United States, Discount Bank offset Ampal's cash balance against the loan, recalled the remaining $67 million in November 2012, and obtained a Tel Aviv District Court ruling in December appointing a receiver to sell Ampal's Gadot stake.[23] In 2012, Ampal also proposed a debt settlement under which Maiman would inject $6 million into Ampal by transferring his 24% holding in Eltek in exchange for $3 million worth of Ampal shares.[24]

In February 2013, a U.S. Bankruptcy Court proceeding addressed the transfer of control of Ampal to its bondholders. Maiman, who had served as chairman, president, and CEO, was ordered to leave the company, and CFO Irit Illouz was also expected to depart.[15] The report stated that Maiman and Illouz had received $23 million in combined salary between 2006 and 2011: $14.2 million for Maiman and $8.4 million for Illouz.[15] Later in 2013, a U.S. court ordered Ampal liquidated under Chapter 7 proceedings; by 2017, its debts remained at nearly NIS 1 billion, with EMG-related arbitration claims among the company's principal remaining assets.[7]

Ampal pursued international legal remedies against Egypt through an ICSID arbitration. A U.S. Department of State submission identified the case as Ampal-American Israel Corp. v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, brought under the United States-Egypt bilateral investment treaty.[25] A Decision on Jurisdiction dated February 1, 2016, addressed jurisdictional questions, with the tribunal concluding that an investment tribunal lacks jurisdiction over investments made illegally in violation of the laws and regulations of a contracting state.[25]

In March 2017, an ICSID arbitration panel ruled that Egypt bore responsibility for confiscation and other violations relating to the EMG investment, including failure to protect the gas pipeline from attacks and conduct connected with the gas-supply agreement.[7] The portion of the claim addressed in that ruling could amount to as much as $174 million, while three other related lawsuits totaling $635 million remained outstanding. The panel had not yet determined the final damages amount at the time of the report.[7]

Studies of American Jewish support for Israel identified Ampal and the Palestine Economic Corporation as the two major organizations providing economic assistance to Israel on a business or investment basis.[4] Their securities appeals combined commercial considerations with emotional attachment to Israel, particularly when investments were used to finance projects such as immigrant housing. The same study estimated that private investment from the United States to Israel amounted to approximately $20–25 million per year during the two years preceding its publication.[4]

Ampal's practical contribution included securing investment for Israeli industry, raising municipal-development capital, and leasing ships to transport supplies and goods to Israeli manufacturers.[3] These activities made the company an institutional bridge between American capital and Israel's developing economy, using commercial investment and lending rather than philanthropy alone.[4][3]

Several aspects of Ampal's later history involve disputed claims. Egypt maintained that the gas agreement was terminated because Israel had not paid its bills, while Israel held that payments were suspended because terrorist attacks had made deliveries impossible.[21] Critics also alleged that Israel received Egyptian gas below market prices and that associates of former Egyptian president Hosni Mubarak profited from the arrangements; Israel denied the below-market-price allegation.[21]

The EMG-related transactions between Maiman's private Merhav Group and Ampal drew scrutiny as related-party dealings. Reporting indicated that between 2005 and 2007, Maiman sold EMG shares to Ampal and investment institutions for a reported total of NIS 1.3 billion, mainly in cash, valuing EMG at $2.2 billion at the time.[26] Maiman and CFO Irit Illouz were also reported to have received approximately NIS 100 million in combined compensation between 2003 and 2011 while the company's financial condition deteriorated.[26]

Sources differ on the price Maiman paid when he acquired control of Ampal from the Steinmetz family in 2002: one report cites $174 million, while a contemporaneous report states that Merhav acquired 51% of Ampal for $83 million.[15][27] Sources likewise reported Ampal's direct EMG ownership as 12.5%, while another account described Maiman's combined ownership through Ampal and his private Merhav Group as 20.6%; the figures concern different ownership relationships rather than the same direct stake.[22][28]