Half a year after cash-flow problems forced him to give up ownership of the Maariv daily, in which he and his family had invested 90 million shekels ($24.7 million), Shlomo Ben-Zvi has packed up and moved to Boston, but his lawyer says Ben-Zvi’s heart is still here.
Many people have lost a lot of money over the years in the Israeli media market. There have been the tycoons who have burned through hundreds of millions of shekels on television stations and newspapers, but Shlomo Ben-Zvi appears to be the most creative of them. He managed to do it again and again and never learned his lesson. He assumed control of a large number of media properties, but was repeatedly forced to retreat, to institute layoffs, engage in confrontation with partners and staff and to close up shop. Now, after years of such activities, it looks like he’s trying to take a time-out, at least for a while.
Here’s just of partial account of Ben-Zvi’s media business debacles: He invested $12 million in the failed Tchelet television station, which broadcast religious programming. He sank an additional loss-making $10 million into shares of Channel 10. He invested in the national religious newspaper Hatzofeh and merged it with Makor Rishon. He also put funds into an Israeli edition of Businessweek and in the free Yisraeli newspaper with Las Vegas casino magnate Sheldon Adelson. This year he lost his ownership interest in Makor Rishon and in the Maariv daily. Early in its history, Maariv had the largest circulation of any newspaper in the country.
Ben-Zvi moved to Boston with his wife and two young children recently. Relatives and other acquaintances say he decided to devote a year to studying at Harvard University, while his older children remain in Israel. For part, Ben-Zvi has told the Walla news website that his place of residence and the center of his life remain in Israel.
So why is he in Boston? Is it because of the debts that he has amassed, as some of his business contacts suggest? Ben-Zvi is still personally on the hook for some 3.5 million shekels ($960,000) in debt that he left behind in Israel. And there are legal proceedings pending against him filed by journalist Haggai Matar, the former chairman of the journalists’ committee at Maariv, who was dismissed. There are a number of other lawsuits pending against companies that Ben-Zvi controlled, including claims by everyone from suppliers to employees to investors.
One court even threatened Ben-Zvi with a summons after he failed to respond to legal proceedings. Ben-Zvi then submitted an affidavit saying that he was experiencing severe trauma due to the collapse of his media holdings.
“He hasn’t fled anywhere. We are in regular contact,” says Shalom Goldblatt, who represents Ben-Zvi’s companies that are currently subject to a stay of legal proceedings. “He is also assisting the liquidator with all aspects of the liquidation proceedings and the transfer of the assets of Maariv and Makor Rishon.” Ben-Zvi intends to return to Israel in December, Goldblatt says, and creditors will be paid and the former Maariv owner will be released from his personal guarantees when various business transactions are completed and dividends paid to companies that Ben-Zvi owns. “There will be money in the bank,” Goldblatt adds.
The Maariv adventure that Ben-Zvi embarked upon in September 2012 cost him and his family 90 million shekels. Earlier, in 2010 and 2011, it appeared that, after years of losses and struggles for survival, Makor Rishon, which Ben-Zvi owned, had managed to develop a broad subscriber base, public recognition and a firm financial footing. But for Ben-Zvi it was the sign that it was time to revive his efforts to buy a more substantial media property at the heart of the Israeli media scene, rather than making do with the niche market represented by right-leaning Makor Rishon. From his small Tel Aviv office, he summoned a number of journalists and business people in an attempt to enlist them in his efforts.
One media person who met with him at the time said he was offering salaries that were much higher than the going rate, as if he were showing everyone than he knew better than the established media players how to make money in the newspaper business. In setting his sights on Maariv, Ben-Zvi saw a newspaper in distress, which was then losing about 15 million shekels a month. He saw it as an opportunity to buy the daily cheaply and merge it with Makor Rishon. At the time the paper was owned by the IDB group’s Discount Investment Corp., which was then controlled by Nochi Dankner. A lot has been and will continue to be said about Dankner’s controversial acquisition of Maariv, which resulted in the loss of nearly 400 million shekels to Discount Investment’s shareholders. The purchase of Maariv was seen primarily as an effort to enhance Dankner’s influence and to protect IDB.
Dankner initially opposed the sale of the paper to Ben-Zvi, a source close to the matter says, and attempted to pressure the board of Discount Investment to retain control of the paper and carry out cuts instead. Ben-Zvi visited Dankner at his home twice. Dankner ultimately convinced Ben-Zvi to raise the purchase price for Maariv, settling on 85 million shekels. After two-and-a-half months of negotiations, the transaction was finalized in September 2012.
Those associated with Ben-Zvi saw it as a bargain. The newspaper’s staff were not a party to the sale, and Ben-Zvi hoped that he could carry out aggressive streamlining after merging operations with Makor Rishon. He expected to realize savings in overheads, particularly in distribution and printing costs. Then, however, the unexpected occurred when Discount Investment was forced, without prior notice, to have Maariv file for court protection from creditors, just days after Dankner and Ben-Zvi had come to an agreement. Although Ben-Zvi and his team knew this presented a different set of circumstances, they continued to pursue the purchase of Maariv through the newspaper’s court-appointed trustees. The court proceedings and negotiations with the newspaper’s staff complicated matter for Ben-Zvi, requiring him to commit to keeping on staff hundreds of the Maariv employees he had planned cut.
“It was clear that he didn’t intend to follow through with the agreements,” said a source close to Maariv’s staff. “It was all to obtain a deal, with this entire mess to be sorted out later.” Ben-Zvi would no longer halt his drive to take control of Maariv. There were those who warned him to back off, but he didn’t listen. “There was also an ideological issue, in finding a newspaper that would promote values of faith and of the Land of Israel,” said someone who knows him. “He was really taken with the dream of controlling a major newspaper and having an influence.”
From the outset, Ben-Zvi was at odds with Tel Aviv District Court Judge Varda Alshech, who was furious over his request to rescind the contract with Maariv’s newspaper distribution firm and fire 900 employees. She threatened to take the company away from him immediately. Several months later, the newspaper nearly collapsed and ultimately the distribution company was closed and distribution of the paper transferred to the Bar distribution firm.
“The disparities in distribution costs half a year before distribution was shut down and the cost after the closure amounted to about 5 million shekels a month,” said Udi Ragones, who ultimately became the CEO of Makor Rishon. “That means that we could save about 30 million shekels. That already shows to what an extent the employees prevented us from stabilizing the business. The militant conduct of the workers was unfair.”
So why did Ben-Zvi continue to pursue his plans for Maariv? His family, including his late father-in-law, British investor Conrad Morris, who died in June this year, was willing to pump more and more money into the venture. Morris got regular briefings on negotiations and his major funding was expected to keep the newspaper above water.
In November 2013, four months before he sought court protection from creditors, Ben-Zvi appeared at a conference in Eilat and was continuing to make promises. He announced a freebie edition of Maariv and predicted that within four years, Maariv would eclipse the circulation of Yedioth Aharonoth, the Israeli newspaper with the largest paid circulation.
Ben-Zvi had hoped that Morris would continue to funnel the necessary funding to Maariv, but Morris' health was failing and he ultimately halted further funding, following the counsel of other relatives. Ben-Zvi was left isolated and the paper’s condition deteriorated. In March this year, in debt to the tune of 35 million shekels, he sought court protection from creditors. Several days later, he ceded control of the paper.
The timing was particularly bad. “After all the headaches, in the final month we were running a loss of just 300,000 shekels,” said Ragones. “Despite everything, we had done amazing work. There were conferences that put color back into the life of the paper, but we didn’t carry out the work fast enough and the paper collapsed.”
Control of Maariv was awarded to Eli Azur’s Jerusalem Post group in April of this year. Azur’s Friday weekly paper Sofshavua was then merged with Maariv.
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