The Richest Israelis Got NIS 10 Billion Richer in 2013

Israel's 500 wealthiest people may not be as popular as they once were, but that didn't stop them from increasing their collective wealth by NIS 10 billion in the past year, mostly by shielding their businesses from competition.

It's not easy being a rich person in the Holy Land these days. Austerity measures, tax hikes and cuts to public services – along with the widening income disparity between the rich and everyone else - triggered to a wave of protests targeting the wealthy. Many in the protest movement demand that the rich pay more tax, including through inheritance and luxury tax.

In contrast with the norm before the social-justice protests in mid-2011, many of Israel's ultra-rich now avoid ostentatious displays of wealth. And contrary to conventional wisdom, many of them are by no means oblivious to the society around them.

They too worry about Israel's problems. They understand that their wealth is the product of the society in which they live. Despite their personal comforts and lack of concern about making a living, it's not easy for them. And even if they don't feel it in their gut, intellectually they understand the frustrations of the non-rich.

But in stark contrast to the middle and lower classes, the economic situation for Israel's wealthy has never been better.

An analysis of the list of the 500 wealthiest Israelis reveals that the past year has been one of the best ever for the rich here. The value of their collective assets has climbed from NIS 84 billion a year ago to NIS 94 billion this year – a new record. The number of billionaires here has risen to 67 – another record. Why is that? Most of the billionaires did absolutely nothing that would explain their bonanzas. For most of them, the money was like a gift from the heavens, just another manifestation of an extraordinary period for the global markets.

In the United States, the stock market, which is the best measure of the wealth of shareholders, including controlling shareholders, rose by about 15%. In Israel the Tel Aviv 100 index rose by 9.5% for the period that ended in mid-May. And that's not all. The stock market is a window into the economy as a whole. Its performance is frequently referenced, because it is more immediately measurable than assets of other kinds; but those other assets generally rose substantially in value as well.

There is virtually not a single rich person in Israel without a sizeable securities portfolio in addition to his or her own business interests. On the assumption that a typical portfolio contains a mix of stocks and bonds, it probably rose in value by a double-digit percentage. There is also almost no wealthy person in Israel who doesn't own real estate. In fact, for many, it is the principal component of their personal investing. It doesn't hurt that the prices of land and residential real estate have both gone up this year along with many commodities prices – including in the diamond industry, where a number of families in Israel make quite a good living.

Taking all these additional assets into account, it's fair to assume the NIS 94 billion estimate of the collective wealth of Israel's 500 richest people is conservative. As in prior years, the figure is based on publicly available data from the stock exchange and public business transactions. It does not include appreciation of wealth that is more difficult to measure, such as the value of personal investment portfolios and real estate holdings. Plain and simply, if you were rich 12 months ago, now you are richer – even if you never left home or took a year-long vacation from your business affairs.

The gains in the market over the past year are also a reflection of a total economic disconnect between the wealthy among us and everyone else. Right after the outbreak of the global economic crisis in 2008, companies here and abroad aggressively streamlined their operations. They laid-off staff and cut payroll costs, but also invested in information technology and automation. So when things took a turn for the better between 2010 and 2012, many of them became more profitable.

Both controlling shareholders and passive investors holding the shares of these companies benefitted through dividend payments and capital gains. They were the winners in the process. But the salaried employees were the losers. They lost their jobs, had to resort to part-time positions or saw their salaries frozen or sometimes cut. It happened all over the world.

And then there's this. In Israel and the United States, energy costs for industry plummeted due to the discovery of huge reservoirs of natural gas. Cheap gas lowers the cost of production even further, making businesses even more profitable. Government has also done its part to improve things for the wealthy. Although in nominal terms, the rich pay a lot of tax, their tax burden in relative terms is very low, because most of their income comes from capital appreciation rather than employment. It comes from capital gains, interest, income from assets abroad and rental income from real estate.

Who are Israel's 500 richest people exactly? Although newly wealthy high-tech executives aren't absent from the list altogether, the wealth of most of the richest Israelis is not new money. Because Israel's economy really only took off within the past two or three decades, it's hard to talk about old money and new money, but most of the super-rich were also on the list ten years ago. In many cases now, the list features the second or even third generations of wealthy families. And that means something, because, as demonstrated elsewhere in the world, the younger generations of such families have a different outlook from those who build their empires from scratch.

Many of Israel's wealthiest families made their fortunes through what economists call "rent seeking," or pursuing economic gain through exclusive rights, monopolies and other means of shielding operations from competition. The Tshuva family, for example, has benefitted from a natural gas monopoly, and the Ofer family enjoys a natural resource monopoly via Israel Chemicals. For others, such as the Strauss family of Strauss-Elite foods, Moshe Wertheim's family of Tara dairy and local the Coca-Cola beverage business and Tzadik Bino of the First International Bank of Israel and Paz Oil Company, the benefits have come from engaging in businesses in markets with a relative lack of competition. Also on the list are people who made their fortunes through exclusive importing rights, particularly in the automotive industry.

And there are those who have dropped off the list: IDB's Nochi Dankner; Elbit Imaging's Moti Zisser; Yosef Maiman at Ampal, and Suny Electronic's Ilan Ben-Dov.

It should also be said that many of the wealthy people in this country got where they are based on their own talents and hard work – and of course a little luck. In addition to high-tech entrepreneurs who sold off businesses based on their own ideas, there are business people like supermarket mogul Rami Levy, who broke into what was hitherto an oligopoly. Families, like those of Stef Wertheimer at Iscar, Keter Segol and the founders of Teva, have built their own international industrial empires. People like them are also on the list.

This year's top 10

1. Stef Wertheimer and Family

2013 net worth: $7.3 - $8.1 billion

2012 net worth: $6.8 - $7.6 billion

Change: Increase of about $500 million

Stef Wertheimer founded the cutting-tool firm Iscar Blades. He sold an 80% stake in the company, now known as IMC Metalworking, to Warren Buffett’s Berkshire Hathaway for $4 billion in 2006. Last month Buffett exercised an option to purchase the remaining shares for $2.05 billion ‏(before taxes‏). The company’s rapid growth occurred under the chairmanship of Wertheim’s son Eitan and Jacob Harpaz as CEO.

2. Shari Arison

2013 net worth: $4.2 - $4.4 billion

2012 net worth: $3.7 - $3.9 billion

Change: Increase of about $500 million

Shari Arison and her brother, Micky, are heirs to Carnival Cruise Lines, which was founded by their father, Ted. Most of Shari Arison’s wealth is from her stake in Carnival Corporation, which has increased in value by about 30% over the past year. Among her other interests are a controlling stake in Bank Hapoalim and property developer Housing & Development Ltd.

3. Idan Ofer

2013 net worth: $4 - $4.5 billion

2012 net worth: $3.5 - $4 billion

Change: Increase of about $500 million

Brothers Idan and Eyal Ofer inherited their fortune from their father, Sammy, who died about two years ago. The family’s business empire, which includes shipping, chemicals, real estate and banking, was split up before Sammy Ofer’s death. The most important source of Idan Ofer’s wealth is his 51% stake in The Israel Corporation, which appreciated in value by 17% over the past year to $5.3 billion ‏(NIS 20 billion‏). Ofer also owns a small stake in Royal Caribbean Cruises through various family trusts.

4. Arnon Milchan

2013 net worth: $2.9 - $3.4 billion

2012 net worth: $3 - $3.5 billion

Change: Decrease of about $100 million

Known to many Israelis as a Hollywood mogul and the producer of box office hits such as “Pretty Women,” Milchan also worked for a time as an Israeli secret agent and was involved in the country’s reputed nuclear program, according to a recent biography, “Confidential: The Life of Secret Agent Turned Hollywood Tycoon.” Media tycoon Rupert Murdoch has a stake in Milchan’s New Regency film production company. Milchan, who lives in Los Angeles, also has a stake in Israel’s Channel 10 television station.

5. Beny Steinmetz

2013 net worth: $2.7 - $3.4 billion

2012 net worth: $2.5 - $3.2 billion

Change: Increase of about $200 million

Beny Steinmetz and his brother, Daniel, inherited diamond businesses from their father which have expanded in large measure due to Beny Steinmetz’s connection with the diamond-trading giant De Beers. Steinmetz also invested in real estate, high tech and engineering ventures. Recently he has devoted his attention largely to investments in diamond and precious metals mining. He and his family have lived in Switzerland in recent years.

6. Mikhail ‏(Michael‏) Mirilashvili, Vyacheslav ‏(Yitzhak‏) Mirilashvili

2013 net worth: $2.5 - $3 billion

Mikhail Mirilashvili and his son Vyacheslav are Georgian-Israeli businessmen who have a 5.2% stake in the oil and gas exploration company ILDC Energy. Mikhail Mirilashvili first made his money in the 1980s through his family’s real estate and gambling interests. His business interests in Israel include the Kitaim venture capital fund and the Hoshen Argaman diamond firm. Vyacheslav Mirilashvili made headlines this year with the sale of his 40% stake in the Russian social networking website VKontakte for $1.12 billion.

7. Yitzhak and Haya Tshuva

2013 net worth: $2 - $2.5 billion

2012 net worth: $800 million -$1 billion

Change: Increase of about $1.35 billion

In addition to being the controlling shareholder of the Delek Group, Yitzhak Tshuva has private investments in real estate, mostly in North America. Delek Group, his major asset, is in the oil and gas industry, as well as insurance and motor vehicle sales. The past year was an excellent one for the group, notably due to its stake in the Leviathan offshore gas field, which has boosted Tshuva’s own net worth.

8. Eyal Ofer

2013 net worth: $1.8 - $2.1 billion

2012 net worth: $1.7 - $2 billion

Change: Increase of about $100 million

The brother of Idan Ofer ‏(see above‏), Eyal Ofer received an interest in the controlling shareholder group at Mizrahi-Tefahot Bank as part of the division of the family’s assets. Its value has increased by 20% this year. He also got a stake in Royal Caribbean Cruises, shares of which have risen 30% this year. In addition, he has substantial real estate holdings, including shares in the Israeli real estate firm Melisron.

9. Gil Shwed

2013 net worth: $1.8 - $1.9 billion

2012 net worth: $1.9 - $2 billion

Change: Decrease of about $100 million

Most of Gil Shwed’s assets are in his information and Internet security business, Check Point Software Technologies, a company he founded with two partners who are no longer actively involved in it. This year has not been a particularly successful one for the company, whose shares have declined. Shwed is known for his relatively modest lifestyle, though in the past three years, the sale of his share options has earned him about $300 million.

10. Teddy Sagi

2013 net worth: $1.5 - $2 billion

2012 net worth: $1.2 - $1.4 billion

Change: Increase of about $450 million

Teddy Sagi got the attention of business journalists after his successful London public offering for Playtech, the online gambling software group he founded in 1999. The offering gave the company an initial market capitalization of close to a billion dollars, and today the company is trading in London at $2.8 billion. A decade earlier he was in the news for considerably less positive reasons − a conviction in a plea bargain over alleged securities manipulation that resulted in a nine-month jail term.

Moti Kimchi, Nir Keidar, Bloomberg and Reuters
David Bachar
Moti Kimchi
Emil Salman
Ofer Vaknin