About a month ago, a young man barely known in Israel named Eli Rozenberg arrived at a meeting of El Al Airlines’ board of directors and said he was looking into the possibility of buying control of Israel’s flag carrier from Tami Mozes Borovitz. Rozenberg had been coached by associates on how to conduct himself, but the atmosphere was filled with tension and suspicion.
One of the things that El Al’s management wanted to learn was quite basic: Who were the airline’s proposed new owners? Was it Rozenberg, a 27-year-old reported by the local media as just completing his yeshiva studies in Jerusalem? Or was it his father, Kenny, who controls an empire of nursing homes and other health care facilities in the United States?
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“It seemed like he had no idea what he was doing in this movie,” recounts one source close to El Al management, who asked not to be identified. “He barely uttered a word during the meeting. He seemed to be repeating things he was told to say. When asked what the source of the money was for the purchase, he replied that his father had given him a 25-year loan. In the United States, that’s a gift taxable at a 40% rate.”
Sources close to Rozenberg confirmed the account. As one of them explained, both Israeli and American consultants were retained to ensure that everything was structured to win approval from Israeli authorities.
“When Rozenberg applied for the permit from the Government Companies Authority, he provided all the required information regarding the loan. It showed he had liquid capital of $150 million,” says one Rozenberg associate. “When you apply for a [control] permit from the Companies Authority, especially when it comes to a company like El Al, approvals come not only from financial bodies [in the government], but also from those responsible for security. They examine it from every angle. “
As of two weeks ago, Rozenberg is El Al’s controlling shareholder. In a public offering that diluted Mozes Borovitz’s stake to 15.2%, Rozenberg acquired 43% of the airline’s shares for 360 million shekels ($105 million). The loan he received from his father is not secured and carries no interest.
‘Ambitious young man’
“Eli has done a few property deals outside of Israel, but of course this is his first major deal. He’s a very ambitious young man, very focused, very sharp, a rational person who fully understands what it means to buy a business like El Al,” says one associate. “The word avrech [yeshiva student] is confusing because he’s American and that’s very different from the image of Haredim in Israel. He’s a Zionist who comes from a family with a deep Zionist consciousness.”
Still, since Rozenberg’s name first emerged during the summer as a potential buyer, El Al’s management has wondered whether he is really the man behind the deal. Last week a lawyer for Mozes Borovitz was questioning whether Rozenberg was a straw man for his father, who does not have Israeli citizenship, which is a condition for owning the airline. On those grounds, he urged that control not be transferred to the son.
Among other things, the letter, which was written by Dori Klagsbald to the defense and transportation ministers, asserted that when Rozenberg’s advisers first met with Mozes Borovitz two months ago they presented themselves as working for father Kenny Rozenberg. A few days later one of the advisers, Amikam Ben-Zvi, reportedly said on the issue of citizenship, “It won’t be a problem. Kenny Rozenberg has a son, Eli Rozenberg, a yeshiva student who has been learning in a yeshiva for several years in Israel, and we’ll register the shares in his name.” The letter asserted that the loan was further proof that the father is really the controlling shareholder.
In any case, Eli Rozenberg is keeping a very low profile. He has communicated exclusively through public relations firms and declined to be interviewed by TheMarker, even for background. People who did agree to be interviewed for this article and had been involved in the acquisition process say they have never met him. The company Rozenberg used to buy El Al, Kanfei Nesharim, was founded just two months ago.
The two people most involved in the El Al deal – a Haredi businessman named Avraham Poupko and Ben-Zvi, a former CEO of the Hamashbir Lezarchan retail chain – have known Kenny Rozenberg for years. “Ben-Zvi and Poupko are managing the operation and making the decisions,” says one source. “They are very protective of Eli. We’re talking about a 27-year-old who only immigrated to Israel a few years ago and became a citizen only recently, it appears just before the El Al acquisition.”
Another person connected to the Rozenberg family is Rabbi Pinchas Abuhatzeira, the grandson of Rabbi Yisrael Abuhatzeira, popularly known as the Baba Sali. Pinchas Abuhatzeira is reportedly one of Israel’s richest rabbis, with a fortune estimated by Forbes magazine in 2014 at 1.3 billion shekels.
A source close to Kanfei Nesharim says the rabbi is not involved in El Al. “It is true that the Rozenberg family, father and son, see Rabbi Abuhatzeira as their rabbi. But he has religious and spiritual authority only, no economic role.”
The question remains what the family wants with El Al. On a purely business basis, no one seems to have much confidence in the airline’s future. The share offering attracted no interest from stock market investors or Borovitz, leaving almost the entire issue to be bought up by Rozenberg and the rest by the Israeli government, which had committed to purchasing any unsold stock.
The reason is simple: No one knows when international air travel will be fully restored, right now Israel is in the midst of a coronavirus crisis that shows no signs of ending and El Al had been struggling before the coronavirus.
“No one denies that the company is in crisis,” says a source close to Rozenberg. “But El Al is a powerful Israeli brand and it operates very profitable routes to Europe and North America. The crisis has created business opportunities.” He noted recent permission granting El Al permission to fly in Saudi airspace, which will cut flying times to East Asia.
“Eli is an investor in the company, he doesn’t intend to manage it,” says an associate. “He won’t be another Mozes Borovitz, who effectively managed El Al and micromanaged things. A steering team will make the decisions on spending and appointments. It will be a deliberate and organized decision-making process. Of course, in the end Eli Rozenberg is the one who will approve the decisions.”
Against that, a source in the aviation industry expressed concern about the entire acquisition, which he termed “absurd.”
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“You need someone with long-term vision that will build the company from anew, like building a budget from zero. It will require a very painful recovery plan. I’ve been looking at everything from the side and asking myself if this young man really understands what he’s gotten into,” he says.
Meanwhile, Ben-Zvi and Poupko have assembled a team that will be shepherding the takeover at least for the next few months. It is headed by Reem Aminoach, a financial adviser and the husband of former Bank Leumi CEO Rakefet Russak-Aminoach.
Others include Roni Numa, a reserve general; Gabriela Shalev, a former ambassador to the United Nations; and Doron Cohen, a former Finance Ministry director general.
Best known of all of the team is Jason Greenblatt, President Donald Trump’s former Middle East emissary, who is expected to be named to El Al’s board and help the airline with his international connections. Kanfei Nesharim says other major figures are being recruited but declines to identify them.
But what does Rozenberg expect to get out of El Al? The Haredi website Bahazit.com offers one angle, quoting a close associate of Kenny Rozenberg’s as saying he is motivated by his Zionism and a desire to see El Al fully observe Shabbat. “There’s more ideology than business here. He’s ready to lose on the deal,” says the source quoted by Bahazit.
Haredi news sources say the first thing the new owners plan to do is to stop Shabbat flights by El Al’s Sun d’Or charter subsidiary and to begin serving exclusively Glatt kosher food on all flights. Kanfei Nesharim sources deny all of this. “Decisions on El Al will be made exclusively on a professional basis,” one of them said.
The company, in a statement, signaled that El Al will be run along strictly business lines.
“Kanfei Nesharim plans to name directors both people who can help to stabilize the airline financially and contribute to its business development. We are very much aware of the responsibility now that Kanfei Nesharim has become El Al’s controlling shareholder.”
As to motives, the statement continued: “Eli Rozenberg’s decision to acquire El Al through the public offering was taken for Zionist and business reasons, while considering the business potential of the global aviation industry against the background of the coronavirus and the future we see in its wake.”
Like father, like son
Like his son, Kenny Rozenberg was all but unknown to Israeli business until a few weeks ago. Age 54 and living in Monsey, New York, his net worth is unknown but is estimated at between $500 million and $1 billion. He started out as a medical-device technician and volunteer paramedic for the United Hatzalah organization. He continues volunteering to this day.
He bought his first old-age home, a small facility of 77 beds in the Bronx, in 1995. He went on to buy more and operates almost 50 facilities under the name Centers Health Care mainly in the New York area and more recently in Kansas City.
Some of the facilities are wholly owned, others in partnership and others are registered under the name of his wife Shoshana. Rozenberg also has an ambulance company called SeniorCare EMS and owns real estate.
Some of the facilities he has acquired over the years were community-owned, nonprofit institutions that ran into financial trouble. He would upgrade and improve them, while at the same time relying on government financial support, which entails close regulatory supervision.
El Al is Rozenberg’s most significant investment in Israel to date, but it’s not his first outside his core business. In recent years he had been involved in setting up a winery at Moshav Neveh Ilan that ended up in a pending lawsuit.
The authorities have at times been critical of his facilities. The Centers for Medicare & Medicaid Services, the federal agency that oversees public health programs, has rated several of Rozenberg’s old-age homes as under the national average in connection with the level of service. Others were rated even lower and a small number put on a list of facilities requiring special monitoring.
The authorities in the U.S. have also cited Centers Health Care for its treatment of workers. A year ago, for instance, the U.S. Labor Department announced that the company would pay back wages to 89 employees at three Rhode Island nursing facilities for violating rules on minimum wage and overtime. In a settlement, Centers agreed to pay back wages and penalties totalling $261,000.
In January, the company’s ambulance unit paid $1.2 million to the federal government for allegedly double-billing insurance plans for services.