Taking Stock / Secrets of shakshuka
4 big, red tomatoes, finely diced
1 large onion, thinly sliced
1 tsp chicken soup powder
Garlic, hot paprika
Mix ingredients. Fry in olive oil or butter.
(Folk recipe for shakshuka)
Since The Israel Corporation's lawyer Ram Caspi managed to sew up that fantastic deal for his clients, snapping up the Zim shipping company at half price, shakshuka has become more than a tasty Middle Eastern version of an omelette. It has become the sobriquet for the privatization of Zim, and for spicy egg dripping from the faces of the treasury's top people.
The whole thing has taken on the proportion of legend by now. At some point in the negotiations, Caspi suggested the government adopt the shakshuka method: Throw all the numbers that came up during the negotiations into a bowl, stir, average them and close the deal.
Any novice negotiator would notice the trap: Half the numbers going into the shakshuka would be ones that Caspi prepared in advance to lower the average. Caspi evidently thought that the prices the treasury was suggesting were good ones, too, so inevitably his clients would find the ultimate result wonderfully toothsome.
The deal in which the state sold its controlling interest in Israel Discount Bank last week to the Bronfman-Schron consortium looks strikingly like that Zim-Israel Corporation deal. A quick review of the components reveals that indeed, we do have the ingredients for a fine shakshuka.
l Egg: A billionaire buyer. In Zim's case, the Ofer brothers; here, Matthew Bronfman.
l Tomato: An eager seller waving the flag of privatization and dying to have a picture taken brandishing a fat check. In Zim's case, the manager of the Government Companies Authority, Eyal Gabbai and Finance Minister Benjamin Netanyahu; in Discount's case, accountant-general Dr. Yaron Zelekha and Finance Minister Benjamin Netanyahu.
l Onion: The buyer is the only game in town. He knows that if he were to abandon the negotiating table, the seller would be stuck with the merchandise and there would be no photo op with a big check. In Zim's case, the Ofer brothers; here, Matthew Bronfman.
l Olive oil or butter: Appraisals that not a soul has seen. In both cases, the state came armed with assessments by Zvi Hefetz.
You get the picture: all the ingredients are here. Ostensibly the Discount deal is a sequel to Zim's sale: again Bibi sold a state asset to billionaires for peanuts.
Right? Not at all.
Everybody who's licked the last of the shakshuka from his plate knows that each chef has his own secret ingredient, or manner of cooking the dish, rendering the results wholly unique. The secret ingredient in the case of Discount was market cap.
Zim is a wholly private company, while Bank Discount is listed for trade on the Tel Aviv Stock Exchange.
Every day thousands of investors trade in Bank Discount stock, while dozens of analysts inspect its financials every quarter and year. It is highly unlikely that Bronfman knew something about Bank Discount that every last investor in Tel Aviv didn't know.
In Zim's case, the government sold a private company operating in shipping, which your average Israeli investor knows nothing about. The Ofers did know that Zim stood before an unprecedented boom in its business, though.
One down, none to go
In both cases, the state faced a single buyer.
But in Zim's case, the Ofers were the only ones there because they already owned half of the company. No serious entity would want to become the Ofers' partner in Zim, unless it had been coordinated in advance.
In Bank Discount's case, Matthew Bronfman was the only buyer because all the rest dropped out of the race. Why? Israel's economy has been recovering and Bank Discount's share price had almost doubled in the last 18 months, so why did they withdraw?
That is exactly why. The only buyer of any Israeli bank who has made anything on the deal is apparently Zadik Bino, who bought First International Bank of Israel for half the bank's shareholders' equity. Other investors in Israel's banks in the last decade have done poorly on their investment.
In fact, the only ones to benefit from the banks' privatization to date were the managers appointed to run them. Nochi Dankner became a tycoon by virtue of his appointment to run Bank Hapoalim's credit committee, and Shlomo Nehama became one of the most powerful people in Israel by virtue of his appointment as that same bank's chairman.
Do you still think Matthew Bronfman got a bargain in Bank Discount? Well, we have a suggestion for you. Buy Bank Discount stock on the market. You'll be paying 20 percent more and won't get the controlling interest. But you'll have one key advantage that Bronfman the billionaire won't have. They day it transpires just how hard it is to cure Bank Discount of its myriad ills, you can dump your stock. He can't.
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