Investment company Aurec on Thursday sold its last big asset in Israel, directory company Golden Pages, to fledgling private equity fund Markstone.
The NIS 500 million deal marks the end of a selling spree that started in 1998 with the huge initial public offering of software company Amdocs.
Aurec, a partnership between Israel's most secretive billionaires, Morris Kahn and brothers Shmuel and Zvi Meitar, has taken in $1.7 billion in the past six years. The businesses the trio owns are well-known and well-publicized, but very little is known about the men behind the partnership.
After a year of reviewing potential investments, Markstone partners Ron Lubash, Amir Kass and Eliot Broidy have elected to spend hundreds of millions of shekels on one of the best-known, strongest businesses in Israel. On Thursday night the fund's representatives signed a contract to buy the publishing company, which puts out the printed and online versions of all Israel's phone directories, from the Aurec group.
The 77-year-old Kahn is a resident of Israel, but he spends much of his time on his yacht. Recently, he joined the public campaign to save Eilat Bay's coral reefs from pollution. Kahn is considered the primary, if not only, financier of the not-for-profit Zalul, which is calling for the removal of fish farming from the bay.
Only when procedures were in place for the Amdocs issue did even the first details become available regarding the partnership's business activities. Amdocs, which develops and markets billing systems for the telecommunications sector and is the largest software house in the field, went public according to a market value of $2.75 billion. Aurec owned 24 percent of the company - valued at $660 million - via an overseas holding company. Within two years of the IPO, Aurec had sold all its holdings in Amdocs, pocketing close to $1 billion.
In late 1999, Aurec surprised with its next move, selling its stake in cable television company Golden Channels to its partners, businessman Eliezer Fishman and Yedioth Communications, for $460 million. The surprising move came at the peak of the technology and communications bubble, when everyone thought the cable companies were on the brink of a huge leap forward. The price paid for Golden Channels, $2,100 per subscriber, was considered low. Shmuel Meitar explained at the time that the withdrawal of the American partner, U.S. telecommunications giant SBC, convinced Aurec to sell the multichannel television company. Meitar added that Israeli telecommunications regulation was unbearable, rendering it better not to do business here.
Before Fishman managed to understand that he had paid sky-high for Golden Channels, he was tempted into another deal with the Aurec group: At the end of 2000, Fishman paid Aurec $93 million for 51.5 percent of long distance and Internet service provider Golden Lines. Fishman hoped the third partner in Golden Lines, Telecom Italia, would take part in the deal, but the Milan-based communications giant backed out at the last minute.
In 2000, Aurec closed another exit, selling its 50 percent stake in Netcom, which is engaged in the installation and operation of data communications networks for the business sector. The price for the deal was never publicized but Ispar Investments is estimated to have paid $20 million.
Even after selling Golden Pages, Aurec still has a tiny holding in the Israeli telecommunications sector. The group has a 9 percent share in international undersea cable company Med-1. Aurec, along with its other partners, is looking to exercise an option to sell out to controlling partner Telecom Italia. The deal has been delayed by a dispute between Fishman and Telecom Italia. That deal could also result in a few million more cash in hand for Aurec.
The huge communications sell-off didn't keep Morris Kahn and his partners from trying their Midas touch in other areas. Their attempt to launch a credit card company, Alpha, with the Safra family failed and ended in tens of millions of dollars in losses. A more successful venture was the establishment of a local direct insurance company AIG, jointly held with global insurance company AIG.
In February Markstone closed its first funding section with $400 million, $300 million of which came from the state of New York. Another $60 million from New York City unions. The Israeli public is represented in Markstone in unprecedented proportions for a private equity fund and there is just about no Israeli institutional that isn't in. Bank Hapoalim, Bank Leumi, insurance companies Israel Phoenix and Harel, and energy empire Delek Group are all invested, along with several provident and pension funds.
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