Samy Katsav went from arms dealer to the Shah to an arms industry mogul, buying up state companies that were losing big-time and turning them into world leaders.
"I don't want to comment on Iran."
We don't want you to tell us about your work there, but rather about the atmosphere, the civilian population, the feeling in the country before the revolution in 1979.
Did you sense a change in the years before the revolution?
"I'm not talking about Iran."
"I don't think that people who went somewhere as state emissaries should talk about what happened during their mission. People who perform security jobs should not discuss them."
Would you go back to Iran?
"Once it's possible - sure thing."
Two minutes into a conversation with businessman Samy Katsav are enough to know that he is "old school," a businessman from the older generation, a man who views secrecy as the key to good business and media exposure as a superfluous burden.
Katsav has been in the Israeli arms industry for more than 40 years, and made his fortune that way. He controls companies worth a total of more than NIS 1.5 billion. They make materiel including missile boats, machine guns and electro-optical vision systems for warfare. The group of companies known as the Samy Katsav Group includes six defense companies and others in the real estate industry. All are privately held. SK Group employs 1,200 workers, and has annual sales of more than NIS 1 billion. Market estimates put the group's profits at more than 10 percent of sales, although the group declined to comment on this figure.
Katsav refuses to disclose how much the group is worth. He is only prepared to say that if the entire group was once valued at NIS 500 million, then now two of its half-dozen companies alone are each worth more than that - Israel Weapon Industries (IWI ) and Meprolight (see box ).
Katsav, 64, was part of the Israeli community in late-1970s Iran under the Shah, before Ayatollah Khomeini's rise to power and the Islamic Revolution. This community produced quite a few businessmen, such as Yaakov Nimrodi, as well as diplomats, including Uri Lubrani and Reuven Merhav.
Katsav may be secretive when it comes to his business affairs, but he has no arrogant mannerisms and no battery of secretaries and advisers buffering him from the world. Thirty minutes after we asked to speak to him, he called us back. "Hello, this is Samy Katsav speaking, I was told that you wanted to talk to me," he said in a deep, laid-back voice.
Katsav, who is tall and thin, has lunch in the workers' dining hall and works out of a small office that is near-Spartan in its modesty and the same size as other rooms on the floor.
Only IWI CEO Uri Amit feels a need to explain: "We'll be moving soon to somewhere more spacious." For now the offices and production facility are located in the Israel Military Industries compound, adjacent to Ramat Hasharon, a reminder that the Magen plant once was part of the government-owned IMI.
Katsav divides his week between the various plants. Vacations are out of the question, despite family pressure. "The last vacation I had was in the 1980s. Sometimes I have a trip abroad and stay an extra half-day."
He keeps notes about day-to-day business in his pockets. Whenever he pulls out a memo from one of the managers at his companies, out pops a little note in his cramped handwriting with comments, conclusions and possible actions. Although Katsav says he has been blessed with excellent executives to whom he can delegate authority, he is clearly a hands-on manager.
Katsav's goal for his organization is to have it double sales within five years. To this end, the SK Group will be making a series of acquisitions and mergers in the near future. This means that the folks who grew without bank loans will now have to raise capital through a stock offering or bring in a strategic investor.
"Our strategic plan is to double what we're doing today. The expansion will be into new markets and additional developments," Katsav says. "We will acquire mainly plants and entities that offer synergy. We are interested in defense entities. Four or five months ago we bought 50 percent of Pulse Inteco Systems. We are looking into additional companies. Our capital enables us to invest tens of millions of dollars in acquisitions, without leverage. I've never taken a shekel from the bank to buy a company. If a larger investment becomes necessary now, we will look into raising money."
The man who made a fair share of his fortune by buying government companies from the State of Israel may get two gigantic opportunities in the next few years: Two of the biggest arms companies in Israel may be privatized, IMI and Israel Aerospace Industries.
"We would be very interested in buying them," Katsav admits. "When it is on the agenda, we will consider acquiring IMI and IAI. These industries are synergetic to our industry."
Where will the financing come from?
"Once the matter becomes relevant, we will raise capital. One possibility is a private offering. In a private offering, the investors do not intervene in management."
Would you put IMI through recovery if they let you buy it?
"When it becomes relevant, then we'll see what I do. You can see from the rest of our plants how we function. But IMI is major; it's not just another plant."
Shouldn't the privatization of national assets be restricted?
"It depends whether it is essential. If you look at Israel Shipyards and the Magen plant, you see that they no longer need to be subsidized by the taxpayer. I employ more workers and pay more taxes. On the other hand, privatizing companies that protect the state - that is a problem. The basis of the Israel Defense Forces cannot be privatized."
From Iran to Be'er Sheva, and back
Katsav was born in 1946 to a family of Iraqi origin. Until age 16 he lived in Abadan, a city in southern Iran on the border with Iraq. In those days Abadan had a large Jewish community, and Katsav attended a Jewish school. The family was involved in trade with Iraq. In 1962 he immigrated to Israel with his parents, brother and three sisters.
"I think that every Jew overseas should seek to immigrate to Israel. It's called Zionism and I am not ashamed of that word," he says.
From the good life in Abadan the family landed smack in Bloc A of the new immigrants' tenements in Be'er Sheva, where five people would be crammed into a 23-square-meter apartment.
"In the evenings I studied and during the day I worked in glazing for construction, and also gave private math lessons," Katsav recollects.
His connection to ground warfare materiel dates back to his military service, from 1965 to 1969.
"In the IDF I served in the Artillery Corps, as an officer and a battery commander. During the Six-Day War, I was in Sinai, part of Brigade 7 under Gorodish," he said, referring to the fabled Armored Corps chief Shmuel Gonen.
After his discharge he went back to Iran as an envoy of the artillery systems company Soltam; his two daughters were born there. During a decade in Tehran, he represented other Israeli defense industries vis-a-vis the Shah's pro-Israel establishment.
Katsav refuses to talk about Iran, but journalist Ronen Bergman discusses Katsav's activities in his book "The Secret War with Iran" (published in English in 2008). According to Bergman, Katsav used his extensive ties to the regime to sell the Shah thousands of tons of Soltam's artillery guns, mortar weapons, bombs and shells, in deals worth hundreds of millions of dollars. He filled the Shah's storehouses with ammunition well beyond what the Iranian army needed at the time, as the Shah ordered his army to prepare for a showdown with the Soviet Union.
"If there is one person more than any other to whom Khomeini owes his regime's survival in the great crisis of the '80s, he lives in Ramat Efal and answers to the name 'Samy,'" says Bergman. During the Iran-Iraq War, what saved Iran and Khomeini were the arms purchased under the Shah.
Katsav even considered building a Soltam plant in Tehran, but the Shah fell before that could be done. Bergman writes in his book that Katsav knew about the regime's instability, and warned the Israeli Defense Ministry against the arms sales. Katsav reportedly told a friend at the Defense Ministry in Tel Aviv: "My wife always says that whenever we leave Tehran, we never know what sort of regime will be there when we get back."
Katsav refused to comment on these statements when Bergman's book was published, and still refuses to do so.
Katsav says that about a year before Khomeini orchestrated the Islamic Revolution, the beginnings of a change could be felt on the streets. He returned to Israel on the eve of the revolution in 1979.
"For the first few months I was unemployed, feeling my way. With my savings I bought my first plant - a chip-processing plant in Shlomi," Katsav says. In 1995 he made the leap into the big leagues, buying Israel Shipyards Ltd. from the state.
Before its sale, Israel Shipyards - along with the shipping company Zim - had given the Israeli government steady losses. Katsav, Shlomo Shmeltzer and Shlomi Fogel bought the company for NIS 40 million; Katsav paid for his share using his own capital amassed through business. As part of the sale, the state forgave the company deficits of NIS 808 million, and paid off NIS 48 million in bank debt.
Katsav and his partners turned the company around. It had a few rocky years at the beginning of the decade, but is now much better off: Israel Shipyards went from a NIS 2.6 million loss in 2008 to a NIS 31.5 million profit in 2009, after revenue leaped 75 percent in 2009 to NIS 317 million. The company's accumulated orders ensure revenue will be up 54 percent for 2010.
Building an empire
This year Katsav sold part of his holdings in Israel Shipyards to his partners. He says he was motivated by his desire to invest in expanding his defense business, not by disagreements. Katsav still owns 20.5 percent of the company, which is now hoping to buy Eilat Port and a privatized IMI, or parts of it.
In addition to the shipyards, Katsav remained active in the metal industry, and owns a real estate company that builds in Be'er Sheva. In 2000 he bought Meprolight, a year later he bought Uni-Scope Optical Systems, and in 2003 he bought an electro-optics plant in the United States.
His next deal was once again with the government. In 2004 the Government Corporations Authority wanted to privatize the Magen plant, a badly hemorrhaging unit of IMI, even though it had just finished developing the Tavor rifle. An attempt to sell the Ramat Hasharon plant to a group of investors had fallen through a short while earlier. Katsav offered a mere $2 million for the plant, and the state agreed.
The state comptroller lambasted the Government Corporations Authority for this, accusing it of selling the company for a mess of pottage. Katsav has no problem repeating his version every time the subject comes up. He maintains that to the purchase price must be added the investments that he undertook to make in the company, his commitment to pay employee pensions, and other promises. In practice, he contends, the company cost him $10 million.
Katsav became a rich man thanks to his business deals with the state. And officials at the Finance Ministry disagree with the claim of some that he succeeded because he was able to buy government corporations for a song and make money at the state's expense.
"Samy Katsav took two companies that were hemorrhaging and turned them into a success story," ministry sources say. "People forget how bad a condition these companies were in on the eve of their buyout."
Either way, Katsav is a Zionist to the core, and believes in the ideology behind his businesses.
"The plants were acquired to develop them, not to cash in on the investment. Each one is developing," he emphasizes. "Our objective is to create jobs, develop plants and make them first in their field globally."
What about ideology? You are not selling products that advance world peace.
"There are two sides to weapons. They are also defensive. We are interested in developing our businesses, and to the extent possible in creating jobs. Not everyone who buys arms goes to war. How many countries are there in the world? And they aren't all at war. On the other hand, show me a country that doesn't have weapons. It is actually in the places where there is fighting that there are export obstacles."
Are there parties with whom you are not willing to do business?
"Last year we exported to 40 countries. They all respected us. I believe in values of fairness, honesty and integrity. Anyone who isn't like that - we don't do business with him."
Have you ever wound up going to exotic places for business?
"I prefer short trips. I get to the hotel, meet with whomever I have to, and am happy to return the next day."
Are there clients who demand to meet you before closing any deal?
"Yes, there are clients who want to meet the person behind the deal. That goes for very senior figures too."
What about the Chinese? Do you sell to them?
"The Chinese have their own industry."
In the late 1990s, after the Soviet bloc fell, did you feel that the arms industry had changed?
"Absolutely. Those countries stepped up procurement of Western products - and we have such products."
Did the crisis of 2007-2008 affect you?
"Naturally the crisis had an impact on 2010 in that budgets shrank and countries postponed procurement. Outlay on arms is a significant share of a country's expenditures."
What changes have occurred in the arms industry over the course of your career?
"Nowadays there are a lot of countries that issue tenders. That wasn't customary in the past. Now the buying is done according to bids."
Do you sometimes shoot your weapons to try them out?
At a certain point in the interview Katsav answers his mobile phone, which has been vibrating in his pocket for quite a while. It is his son, who graduated from naval officers' training a week before and was promoted to the rank of lieutenant. The proud father speaks quietly and unhurriedly, keeping everyone in the room waiting. He then leaves the phone with his secretary and tells us with satisfaction: His son was plying the waters on a missile boat he manufactured.
Katsav makes decisions fast when it comes to family, too. "In the morning I met a girl, in the evening we decided to get married," he says of his wife. He was working for Soltam in Iran, and she was working for Soltam in Yokneam. "I came to Israel on vacation, and met her in the hallway at the company. It took us two, three weeks to book a hall and we got married."
There is a fashion today in the U.S. of billionaires like Warren Buffett announcing that they will not be leaving their money to their children. What do you think of that?
"When I get to their level, we'll talk about it. I hope that my kids will carry on the business."
Where do you invest your money?
"I invest in my plants, in development. Aside from that, I always make sure that some of the profits get distributed among the employees. In 2008, the first year that IWI was profitable, the profit was divided among the workers. That was more than NIS 100 million. At Meprolight the profits were also distributed."
What is the key to your success?
"A lot of hard work, getting to know the business inside and out, going into detail. If you've made a promise, keep it. Other than that, everything lives and dies by management."
How many hours a day to you work?
"My average workday lasts 12-14 hours."
What motivates you?
"Creating more jobs."
Do you like everything about your job?
"I enjoy every minute of it. I like every part of the business, from negotiating to marketing. For me the grease on the assembly floor is like perfume."
Do you regret any deal that you made or deals that fell through?
"I don't regret a thing. That is not to say that I haven't made mistakes and errors."
Give me an example.
"I don't recall anything at the moment."