Israel Chem, Volkswagen in magnesium venture deal

TEL AVIV, July 2 (Reuters) - Israel Chemicals Ltd (ICL) (ICL.TA: Quote, Profile, Research) and Volkswagen AG (VOWG.DE: Quote, Profile, Research) have reached a compromise over the German carmaker's demand to pull out of their partnership in Dead Sea Magnesium, the Israeli company said on Thursday.

Under the accord, Volkswagen will stream $30 million to the troubled magnesium plant and transfer its 35 percent stake in the company to ICL, which owns the other 65 percent.

At the same time, ICL, a maker of fertilizers and specialty chemicals, will provide $55.71 million in funds to Dead Sea Magnesium.

"Volkswagen has announced that it has ceased to be a shareholder in the magnesium company in order to focus its efforts on its main activities," ICL said in a statement.

"Volkswagen no longer holds any shares in Dead Sea Magnesium."

The joint venture, formed in 1996, produces magnesium from the Dead Sea and employs 380 people. In 2008 it became the second largest Western magnesium producer, ICL said.

Late last year, Volkswagen sent ICL a letter saying it wanted to pull out of the venture and transfer its stake to ICL.

ICL had rejected the offer since the magnesium company had $100 million in bank debt. (Reporting by Tova Cohen, editing by Gerald E. McCormick)