Since they started a small dairy in the northern Israeli town of Nahariya more than 80 years ago, the Strauss family, which controls the giant food company of the same name, has worked hard to maintain internal harmony, at least toward outsiders. Even when there were disputes, such as when the late Michael Strauss disagreed with his sister Raya Strauss-Ben Dror over the 2004 takeover of Elite Industries, they were settled relatively quietly.
The calm has persevered even as control of Strauss Group moved into the hands of the third generation and it was clear that both the contributions and compensation of individual family members would differ.
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However, the death of Michael Strauss over the weekend may signal the end of that harmony. It not only threatens to alter family dynamics but how the company, Israel’s second-biggest food maker, is controlled. A lot is at stake: Strauss Group controls close to 12% of the Israeli food market, has operations in 20 other countries and its market cap in the Tel Aviv Stock Exchange today is 11.3 billion shekels ($3.3 billion).
The reason for the uncertainty is that when Michael Strauss stepped down as chairman of the company in 2001, he handed over the job to his daughter Ofra Strauss, 60, but kept control of the company and continued to manage affairs behind the scenes.
The company is 57.4%-controlled by a family-owned investment company called Strauss Holdings. Control of Strauss Holdings is a complicated affair. After discounting for a 29% stake held by Strauss Holdings in itself, Michael Strauss’ holding company holds a 75.6% stake and Raya Strauss-Ben Dror the other 24.4%. Control of Michael Strauss’ holding company is split, with 54.7% belonging to the father and the rest split between his children – Ofra with 20.1% and her two siblings, Adi and Irit, each holding 12.6%.
That arrangement understated Michael Strauss’ control, since he held 99% of the voting rights in Strauss Holdings. That gave him the right to appoint a majority of the board members, and therefore the right to decide whether to sell shares in Strauss Group or what kind of dividends to take from it.
Thus, it will be Michael Strauss’ will that decides the character of the food company in the years ahead. It will show who gets his 54.7% equity stake and, more importantly, who gets control of the 99% voting rights stake.
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Since Michael Strauss stepped down, Strauss Group has been identified with Ofra Strauss, who served as chairwoman. In the company’s financial reports she has been listed as a controlling shareholder because her stock is regarded as one with her father’s.
However, the situation is more complicated than that. Ofra Strauss’ stake in Strauss Holdings was bigger than that of each of her two siblings and she chaired Strauss Group, signalling that Michael Strauss saw her as his principal heir.
However, three years ago, Adi Strauss was named chairman of Strauss Holdings, so in principle Ofra Strauss as chairwoman of Strauss Group reports to him. That threw a wrench into a situation where the sister, who is seven years older than her brother, no longer has quite the status and powers of the first-born of her generation.
If things weren’t complicated enough, Ofra Strauss enjoyed compensation just for the years 2011-2019 of 39 million shekels, as well as another 52 million shekels in income from the sale of shares she owned directly in Strauss Group back to the company. Adi and Irit Strauss get by just with the ordinary pay earned by board members as well as dividend income.
Although they have both denied it, Adi Strauss’ appointment created tensions with Ofra Strauss. Until then, the brother had focused on other businesses, including the Alma and Ritz Carlton Hotels and Herbert Samuel restaurant in Tel Aviv.
Whether Michael Strauss decided to put control of the family business in the hands of one sibling or opted to have it shared jointly between them, it will mark a crossroads. One key question facing the family is whether to sell down its stake or perhaps the entire company. If control passes to one member of the third generation, it may include a proviso that he or she buy out the others. If so, that sibling will probably have to recruit a partner to share control.
Osem Investments, one of Strauss’ biggest competitors, underwent much the same process. When it became clear that there was no third-generation heir apparent for the company, it was gradually sold off over the years 2004 to 2016 to the Swiss company Nestle.
Strauss Group is an attractive proposition. Its assets include Strauss Coffee, the world’s fourth-largest maker of roasted and ground coffee. It is also a 50-50 joint venture partner with PepsiCo in U.S.-based Sabra, a maker of packaged salads and the biggest seller of hummus in the country. PepsiCo is an obvious buyer for Strauss Group.