Capitalists and Shakshuka

Maybe business administration is a complicated business. And maybe the entrepreneurs are not enemies of the people.

The film "The Shakshuka System," which was shown last week on Channel 1 television, reminded me of a forgotten event. It happened toward the end of 1998, when the Eisenberg family decided to sell the Israel Corporation.

Only one company was interested in acquiring it - the Potash Corporation of Saskatchewan, Canada, a huge chemical corporation. It wanted to purchase the Israel Corporation to achieve a global monopoly in the field of fertilizers and potash, since the Israel Corporation owns Israel Chemicals and Dead Sea Works.

On January 10, 1999, I published the following report in Haaretz: "The Eisenberg family is selling the Israel Corporation to the Potash Corporation of Saskatchewan for $320 million." It looked like a done deal, and we can assume that Miki Rosenthal would not have made his film about the Ofer family had there not been a dramatic turnaround in the plot.

The day after the report appeared, Idan Ofer boarded an El Al flight from Bangkok to Tel Aviv. The stewards distributed Haaretz on the plane, and the item on the sale of the Israel Corporation caught his eye. Although the deal seemed to be closed, he contacted attorney Ram Caspi immediately after landing in an effort to find out whether he still had a chance. At 10 P.M., the two met in Caspi's office, and from there they phoned Yaakov Neeman, Eisenberg's attorney. Neeman was meeting with the Canadians in New York at the time, formulating the final paragraphs of the agreement.

Caspi asked, "is there anything to discuss?" and Neeman replied, "we haven't signed yet." And then, within two or three days, and without too much study, the Ofer family offered $330 million and purchased the company. Which proves that sometimes, it pays to read newspapers.

The family purchased the Israel Corporation at a valuation of $620 million (paying $330 million for 53 percent of it). Today, it is worth $4.7 billion. Here is conclusive evidence that the company was sold cheap. Here is additional proof of the corrupt ties between tycoons and the government.

But what is the truth? First, the company was purchased from the Eisenberg family, not the state. Second, that was the best price obtainable at the time. Third, and most important, good management, vision and investment pay off - and that is exactly what happened in the Israel Corporation, from that day to this.

It has become a global company, using Israel Chemicals as its platform for expanding worldwide; it has investments and acquisitions all over the globe. That is how it grew and profited, and that is how its value increased. And that is only to the good. Because everyone benefits from the increase in value: the Ofer family, the employees - whose number has increased - and the general public, which holds the company's shares, whether directly or through provident and mutual funds.

Had Israel Chemicals been a government corporation, there is no chance that it would have gone out into the wide world and developed in that way. See, for example, Israel Aerospace Industries and the Mekorot water corporation. Each has tremendous international potential, but government management does not enable global growth. No government will invest the money necessary for that. It is satisfied with whatever political appointments it can make in the companies it controls.

Another interesting story surrounds the sale of the Zim shipping company. Nobody wanted to buy Zim from the government. It was a very problematic company, with an outdated fleet and a strong union. Nobody wanted to get into this losing situation - especially when the government wanted to hold on to its "golden share," as well as forcing the private owners to maintain a minimum number of ships.

Only the Ofers were interested in the company. They already owned 50 percent of Zim via the Israel Corporation and wanted to acquire the 50 percent held by the government. After lengthy negotiations, a price of $115 million was agreed on. Here we go again: The government sells a huge corporation cheap and the Ofers earn millions. Here is additional proof of the corrupt ties between tycoons and the government.

Immediately after the purchase, in 2004, the Ofer family decided to invest in Zim. New ships were purchased and the entire management was replaced. To date, it has invested $350 million in the corporation. One could only dream about the government investing such sums. And from 2004 to 2007, Zim's value gradually climbed, thanks to the tremendous increase in global commerce. Zim made good use of the new fleet it had purchased. It looked as if the Ofers had made the deal of their lives.

But then came the global crisis of 2008, and the wheel turned full circle. At present, 15 percent of Zim's fleet is idle and the company anticipates losses. The Ofer Brothers have asked the bank to reschedule their debts and must invest hundreds of millions in the company to ensure its continued existence. Zim's value today is effectively zero. Any reader could purchase it now for one dollar.

But just a minute: How is that possible? Don't the rich always purchase assets cheap from the government and sell them at a high price? So maybe they don't always profit from privatization. Maybe business administration is a complicated business. And maybe the entrepreneurs are not enemies of the people.