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Very quietly, without any headlines or fanfare, Tnuva's chief financial officer Shaul Glicksberg quit last week.

The timing of his resignation seems bizarre. At this very point in time, Tnuva CEO Arik Raichman is leading the foodstuffs giant to its initial public offering on the Tel Aviv Stock Exchange. The durable dairy cooperative is supposed to morph into a company limited by shares, to publish a prospectus, to raise capital from the public.

Floating a giant like Tnuva should be the high point in any CFO's career. It is the point at which the company has its greatest need for an expert in the seat.

But if you've been keeping close track of that genius of public relations, Raichman, strange happenings on the eve of the coop's IPO wouldn't surprise you.

Blue Square precedent

It was six years ago that the Blue Square Co-Op scandal erupted, with a tremendous bang. Grave reports by public committees on the co-op's conduct forced its leader, Benny Gaon, to resign, and he was even required to return stock options he had received from it.

The mighty battle that the holders of Blue Square participation units waged against Gaon ended in a rout. The co-op's assets were sold and distributed among the shareholders.

That case created a precedent. Instead of a handful of managers gorging from the trough making millions and treating the co-op as their private property, power passed to the shareholders, who could now get their money back in cash.

Arik Raichman knew perfectly well that Tnuva was next in line. But he's a far more sophisticated sort and had no intention of following in Benny Gaon's footsteps, he told us: He would lead the cooperative to privatization himself.

Six years have passed since Raichman declared that Tnuva would be incorporated and privatized, yet it's still a giant cooperative under his control. After three years of headlines about a putative "strategic investor" that was poised to buy some or other large block of shares, it transpired that nobody would touch the cooperative with a barge pole under the terms Raichman was offering. So a year ago, Raichman announced a strategy change: not a strategic partnership, but a public offering.

The Raichmans abound

Yet three months ago, something strange happened. Reports leaked that Tnuva's council had signed a five-year employment contract with Raichman.

Why would the council sign an agreement to keep the 67-year old Raichman in cream cheese for another five years? Was it afraid that he'd up and run a second before the great IPO, which was to be a high point in his career?

Simple, isn't it - Raichman is famously one of the best managers in Israel. How do we know that? Simple, isn't it - the business press has been saying so for years.

But how is his success measured? By growth? Revenues? Profits? Return on equity? Of course not. Tnuva has never published any financial reports, full or partial. Each year, some "results" are leaked to favored journalists, indicating that the co-op earns NIS 150 million-200 million a year.

Who audits these reports? Based on which accounting rules? Until now, the only body supervising its financials was the Supervisory Alliance, i.e. the management company and accounting firm of the moshavim. Who has been managing the Supervisory Alliance during the last four years? Well, one of the personalities is - Yaron Raichman, son of Arik Raichman.

But when you float on the stock exchange, or make noises like somebody about to float on the stock exchange, you can't use some Supervisory Alliance. So Tnuva hired the offices of Somekh Chaikin.

How very strange! Something happened to Tnuva's financials after Somekh-Chaikin wielded its calculators. Anonymous leaks to the press said that as a routine, technical matter, in its first-quarter report Tnuva began recording depreciation for its new dairy in Alon Tavor, which eroded its quarterly profit to just NIS 10 million, or around $2.25 million.

Heeeere's Tnuva!

That's Arik Raichman's Tnuva? $2.25 million? Is that the giant cooperative with shareholder equity of about NIS 2 billion and sales of NIS 5.5 billion a year? Its return on equity is a pitiful 0.5 percent and its net profit a trifling 0.7 percent of turnover?

For the sake of comparison, for the first quarter of 2005, Osem Food Industries presented an net profit of NIS 38 million on turnover of NIS 618 million, and return on equity of 15 percent. Strauss-Elite netted NIS 52 million on turnover of NIS 950 million and yielded 19 percent on equity. And Osem and Elite pay tax, while Tnuva pays a lower rate because it's a cooperative, not a corporation.

Tnuva's first-quarter results beg questions, but the most intriguing of all is whether Raichman really wants to float it.

Thing is, barring dramatic change at Raichman's Tnuva, turning it into a company baring its financials to the public every quarter could prove highly embarrassing for the man who has been marketing himself as a stunning example of success.

Tnuva is no startup or young company elbowing into the arena of giants. It is the giant, it is the oldest and most monopolistic entity in Israel's food arena, with tremendous assets it accrued over the generations of Israel's establishment, accrued in fact even before the state existed.

Hundreds of millions of man-hours, oceans of blood, sweat and tears have been invested in Tnuva, by every last farmer at the moshavim and kibbutzim that own it.

Naturally, if you've been keeping an eye on Tnuva, you're yawning. You knew all that. In recent years, it's been hard to miss the ill-thought investments the company has been making, such as in its fresh-beef plant - nobody has a clue how to return the investment on that white elephant. Or there's the stuttering soya products facility, in which more than $10 million was invested.

Saved by the cow's bell

To Raichman's credit: He transformed Tnuva from a colorless, stagnating concern into a dynamic, competitive one, polishing its brand name into something sexy and truly powerful. But to do that, he poured humongous sums into advertising and marketing, without ever having to prove the result in the form of disclosed profits.

If Tnuva is taken public with pathetic profits like that, massive pressure will be imposed to do something radical such as sell assets and businesses. Raichman's empire will start shrinking like a cheese ball in hell.

The very ones who could save Raichman from public embarrassment are his opponents, a bunch of cow breeders at the moshavim who have opened a campaign against the company's initial public offering, claiming it would impair their rights.

Unhappy cow breeders - instead of urging the company toward an offering as fast as possible so you could understand what's really been going on there for the last 80 years and cash out, you're playing into the hands of the person who'd give his last milk jug to defer the offering. You're pulling his chestnuts out of the fire.

Raichman adores bemusing visitors by looking the part of a doltish farmer while quoting marketing guru Al Ries.

In recent years, Ries has begun to argue that public relations are the most effective tool a manager has in his arsenal. All others pale in comparison.

Given Tnuva's performance and the paucity of information it supplies, and the image of its manager, one can understand why Raichman likes Ries' theories.