When Naty Saidoff announced last week he was buying control of Housing & Construction for 1 billion shekels ($276.2 million), he made clear it wouldn’t be his last deal.
Housing & Construction is “the first in a series of acquisitions Saidoff Group plans,” he said. In fact, it was Saidoff’s third stab at buying an Israeli asset, after abortive bids for Jerusalem Economic Corporation, Africa Israel Investments and Eurocom Communications.
Until he emerged on the Israeli scene less than two years ago, Saidoff was an unknown – an Israeli who left for Los Angeles decades ago and made his fortune in property. That makes him similar to Moti Ben-Moshe, a former Israeli who made money in Germany in energy.
There’s also Argentina property magnate Eduardo Elsztain, who parachuted into Israel by buying control of IDB group in 2013, and brothers Chen and Tzahi Neuman, whose business interests are in Israel.
They are the impending new generation of tycoons, who are building empires in many cases on the ruins of the previous generation of tycoons – Nochi Dankner, Eliezer Fishman, Lev Leviev and Shaul Elovitch – who were brought down by a combination of debt and in some cases legal entanglements.
Saidoff first pursued JEC in September 2016, which was then controlled by an indebted Fishman, with an offer to buy 30% of the property company for 540 million shekels. That was a 20% discount to JEC’s already depressed share price, and shareholders rejected it.
Saidoff then fought with fellow tycoon-on-the-make Ben-Moshe for control of Lev Leviev’s Africa Israel, which is saddled with 3 billion shekels in debt to bondholders. In the end Ben-Moshe prevailed with a bailout offer worth 80 million shekels more.
Saidoff didn’t give up and in February bid up to 875 million for four subsidiaries of Elovitch’s Eurocom Communications, whose prize asset is Israel’s biggest telecommunications provider, Bezeq.
A month later Saidoff backed out, telling the court administering the group that governance changes at Bezeq would effectively prevent whoever owned Eurocom from controlling Bezeq.
Saidoff returned with a better offer for Eurocom, but he now faces competition: Internet Gold, a tier in the Eurocom pyramid, said this week that the Neumans were interested in buying most of its holding in B Communications — one notch below in the pyramid — for 730 million shekels. That would give them control of Bezeq.
In 2013, as Dankner sought to keep control of IDB, the Neumans led a group offering 900 million shekels for control of IDB Development.
The deal fell through, but two years later they were back with an offer of up to 300 million shekels for the filling station company Ten, owned by Fishman. They lost that bid to a private equity fund, but last year they again tried unsuccessfully to buy the energy company Sonol.
Of the emerging tycoons, Ben-Moshe has the best track record for deals completed. He was a partner with Elsztain in buying control of IDB but eventually dropped out in an acrimonious dispute.
However, in 2016, he managed to buy the holding company Alon Blue Square in a complicated bailout process that involved buying equity, repaying debt and injecting capital into the indebted company. He is now trying to wind up a similar multifaceted deal for Africa Israel.
The question remains whether the would-be tycoons will succeed where the last generation failed.
They face a more difficult legal environment, thanks to the Business Concentration Law that put strict limits on the pyramid-structured holding groups preferred by the tycoons. Burned by bad debt from the last generation of tycoons and tighter lending rules, Israeli banks are less prepared to provide the loans to leverage big buyouts.
In addition, the deals the new tycoons are making are exceedingly complicated.
Ben-Moshe’s deal with Africa Israel’s bondholder’s calls for his ExtraHolding to buy control of the company and then for his Blue Square to buy Africa’s 56% stake in its key Africa Residences unit for 1.42 billion shekels.
But Blue Share lacks the cash to finance its part of the deal and will seek to sell bonds and equity to the public and draw on cash and other assets. Meanwhile, Africa Israel bondholders will be issued new bonds. To reassure them regarding his finances, Ben-Moshe is committed to try and take Africa’s Denya Cebus construction subsidiary public within three years.