Israeli Family Business Empire to Split Assets, Rather Than Divest Them

The move may be seen by critics as exploiting a loophole in the concentration law

The director of the Ofer Brothers Group and its various subsidiaries next to a businessman.
אביב חופי

The business empire of the Ofer family, one of Israel’s richest and most powerful, will be divided between two cousins rather than sold off to meet the terms of the Business Concentration Law, two of the family-controlled companies said Sunday.

The law sets a December 2019 deadline for groups like the Ofers, whose publicly traded assets include Melisron and Mizrahi-Tefahot Bank, to divest either their financial holdings or their nonfinancial holdings in order to avoid conflicts of interest while curbing the power of the country’s biggest holding groups.

The Ofers had been expected to decide which of the businesses to sell, but last month TheMarker reported that the family was weighing a plan to divide them between different branches of the family instead. Now, it’s official.

Although the move may be seen by critics as exploiting a loophole in the concentration law, the Wertheim family may adopt the same strategy by divvying up their Mizrahi stake and control of Central Bottling Company (Coca- Cola Israel). In the meantime, the stock market apparently gave a thumbs up to the Ofer plan, sending shares of Mizrahi up 1% to 67.19 shekels ($19.43) and Melisron stock by 1.6% to 143.90.

At stake is about 7 billion shekels worth of assets in Melisron and Mirahi — 3.1 billion now held by Liora Ofer and 3.9 billion by Eyal Ofer, of which 2.85 billion are held by him directly. The amounts don’t include any of the closely held assets they control.

Under the plan announced Sunday, Liora Ofer — daughter of the late Yuli Ofer — will take control of the family’s 60.8% stake in mall developer and owner Melisron. Her cousin Eyal — the son of Yuli’s brother Sammy Ofer — will gain exclusive control of the family’s holding in Mizrahi, Israel’s third-largest bank.

“The concentration law has forced us to make a difficult decision to part with one of our important investments,” Liora Ofer said in a statement. “My decision to remain with the investment in real assets reflects my confidence in the Israeli real estate market.”

Although a binding, detailed agreement has yet to be reached, Melisron and Mizrahi said in a joint statement that the asset swap between the cousins will mainly involve two closely held family investment vehicles called Ofer Investments and Ofer Hldings.

Eyal Ofer will buy the shares now held by Ofer Holdings that comprise part of the controlling block of shares in Mizrahi as well as another batch of free (noncontrolling) Mizrahi stock now held by Ofer Investments. Meanwhile, Liora Ofer will buy the shares in Ofer Investments held by Eyal Ofer and by Doron Ofer, Liora’s brother, if he chooses to join the swap.

Doron will also have an option of buying up to 4.5% of Mizrahi free shares, but those won’t entitle him to be part of the controlling shareholders group with Eyal Ofer and the Wertheim family.

While the concentration law gives the Ofers more than 16 months to complete the asset swap, the completion of Mizrahi’s acquisition of Union Bank of Israel hinges on the families’ separating their financial and non-financial assets. As a result, they are likely to try to complete the swaps as quickly as possible.