Taking stock / That's some dead horse
Last Sunday afternoon, Merrill Lynch opened the bids in the tender it had conducted for the Borovich family, which sought to sell Granite Hacarmel, the parent company of the Sonol chain of gas stations.
The results were impressive. Three bidding consortia ran the race, including business-sector luminaries such as Mivtach Shamir Holdings, Israel Cold Storage & Supply and Yeshayahu Landau, as well as Shlomo Shmeltzer's New Kopel.
Canit Management, belonging to Canadian-Israeli property developer David Azrieli, won, offering $148.5 million for 54 percent of Granite. His bid priced the company at $275 million, which conferred a 30 percent premium over its market cap.
This is a good moment to admit we were surprised by the price. We were especially taken aback when Canit manager Menachem Einan waxed loquacious about Granite's vast potential, and the ideas that Canit, which specializes in shopping centers, has for its new energy company.
Why were we surprised? Maybe because we were still under the powerful impression left by the horror scenarios that the Boroviches had been painting a few months back.
In case it slipped your mind, a year ago the Boroviches agreed to sell Sonol, Granite's main holding, to Dor Alon. But the antitrust commissioner, Ronit Kan, objected, and the parties started to squabble.
Throughout the battle, the sellers and buyer complained the antitrust commissioner had simply failed to understand that Sonol was a dead horse. It was so dead that it had no right to exist. They know the energy business somewhat better than we do. We obediently listened to their learned explanations of why Sonol couldn't stand on its feet any more, and why the only way to save it from the grave was to merge it with Dor Alon.
We did have something niggling away in our memory: Stories we've heard from the Boroviches before, when they bought Granite, about the tremendous contribution they and their international partners, Glencore, had to bring to the company. But really, that was ancient history.
The vast contradiction between the sob-story of hard times at Sonol and the price Azrieli agreed to pay is harder to resolve. Just a few months have passed since the Boroviches were bewailing Sonol's imminent demise.
What are we to learn from this? That there's nothing new under the sun. When businessmen try to convince you of the urgent need for, or danger in, a merger in their industry, take their words with a grain of salt. We barely had a chance to digest the tremendous price Azrieli is paying, when Zadik Bino sprang a similar surprise. Bino, who had declared that he meant to raise NIS 700 million for Paz to finance the acquisition of the Ashdod oil refinery, announced that the tremendous demand from institutional investors had spurred him to increase the amount being raised to NIS 2.2 billion.
Interest closed at 5.0 percent, which is just 1 percent above the interest on comparable Israeli government treasuries. We were surprised by the eagerness with which institutional investors leaped to finance the acquisition of the Ashdod oil refinery. Maybe because again, something was niggling away in our memory.
Thing is, we have trouble forgetting how for years, the people from Oil Refineries and its former parent company, The Israel Corporation, insisted that the Ashdod refinery was too small and insignificant to have any right to exist by itself. It was a sort of auxiliary to the big one, the Haifa oil refinery, and as such must not be split off from it.
Goodness, this seems to be a disease in the energy sector. One minute we're told that the business is worthless, and it has to be merged with somebody in order to save it. Suddenly it's sold all by itself on the open market, and proves to be worth a bob or two.
While the sale of Granite and the Ashdod oil refinery did manage to surprise us, we must admit that when Partner Communications delivered its third-quarter financial statement, showing a leap in profit, we were not astonished. Even when the Cellcom board of directors decided to file a confidential prospectus for a Wall Street offering, we were not taken aback.
True, we remember the wails and howling from the cellular carriers two years ago, that they were about to collapse and send hundreds of people home. Nor have we forgotten their threat that foreign investors would shun Israel if the Communications Ministry went ahead with its dastardly plan to lower the price of incoming calls.
But unlike the case of Sonol and the Ashdod oil refinery, when it came to the cellular trio, it was clear that their forecasts of doom were silly, and were designed to serve the interests of the oligopoly's owners, who wanted to preserve tariff structures that impeded competition.
All three stories, which climaxed inside one week - Granite/Sonol, the Ashdod oil refinery, and the cellular industry - are water under the bridge. They are history. But the regulators supposed to be protecting our interests would do well to learn them well.
Tomorrow is another day, with new reforms and other monopolies that will sob about being doomed if their tariffs are touched, or if they aren't allowed to consolidate. Unless we learn from the above three stories, in which companies bent over backwards to frustrate change and competition, we will be doomed to repeat history again and again and again.
Like us on Facebook and get articles directly in your news feed