Shari Arison, Israel's Wealthiest Woman, Divests Her Empire at Bargain Basement Prices

Billionaire heiress has sold two businesses at steep discounts and looks to be doing the same with Bank Hapoalim

File photo: Shari Arison.
Ariel Schalit / ASSOCIATED PRESS

By Israeli tycoon standards, you don’t get much bigger than Shari Arison. An heiress to the Carnival Cruise Line fortune with an estimated net worth of $5.4 billion, she was ranked the world’s 374th-wealthiest person in 2017 by Forbes magazine.

But Arison, 61, is also one of Israel’s least influential tycoons. Her business empire, unlike those of Eliezer Fishman, Nochi Dankner and the late Moti Zisser, to name a few, never ran up enormous debt with an audacious expansion strategy that left creditors taking big “haircuts.”

But she also never made much of an imprint on the group, whose biggest component is Bank Hapoalim, Israel’s biggest lender. In the 15 years since she inherited her father’s Israeli assets, she failed to raise the value of her holdings appreciably.

And now that she has begun to divest them, she and Efrat Peled — the 10 million shekels ($2.7 million) a year CEO of her investment-holding vehicle Arison Holdings — have also not managed to squeeze the maximum value from them. Indeed, the two sales Arison has completed were done at bargain prices and the outlook for the sale of her Hapoalim stake looks no more promising.

The latest disappointment was Salt of the Earth (Melach Haaretz), which accounts for 80% of all salt sales in Israel. Arison had sought between 250 million and 300 million shekels for the company but last week settled for just a 160 million shekel offer from the private equity fund Fortissimo.

Other bids were apparently even lower because the buyers understood that Arison badly wanted to divest the business.

Salt of the Earth generates earnings before interest, taxes, depreciation and amortization of about 25 million shekels a year and has an estimated shareholders’ equity of 200 million, with cash on its books and no debt. It also controls land in the southern resort town of Eilat that is in the process of being rezoned for hotel and residential use.

Industry sources said Fortissimo got a good price for the company and that it can develop new profit centers out of its core salt business, the fund could earn a considerable return on its investment.

The same scenario played out with Housing & Construction (Shikun & Binui), the building and infrastructure company in which Arison sold her controlling 47% stake last June to the Israeli-American real estate entrepreneur Naty Saidoff.

The timing was inauspicious. Housing & Construction is at the center of a police investigation into allegations that the company and some of its senior executive paid bribes to win infrastructure-construction contracts in Africa and elsewhere overseas.

Arison, who has over the years liked to present her businesses as being a force for good and hoped not to be directly connected with the affair, found herself called in for questioning by investigators, as was Peled.

The affair caused Housing & Construction’s share price on the Tel Aviv Stock Exchange to slide 21% by the time of the sale. Arison agreed to sell her stake for 13% less than the market price at the time, or just 1.1 billion shekels for one of Israel’s biggest and best known companies.

The share price of Housing & Construction has fallen even further since the sale, but Saidoff got such a good price he is still 100 million shekels ahead, on paper. He stands to make an even bigger return if he can improve the company’s standing with stock market investors, improve transparency and lead the company in new directions.

A strategic program for Housing & Construction is already being developed that calls for deepening its involvement in U.S infrastructure projects, reducing its African operations, selling Israeli assets and reducing headquarter overhead costs.

Arison has a water company, called Miya, that is also for sale. But the biggest divestment of all is her controlling holding in Hapoalim, and so far that has gone no better than her other sales.

Arison retained Bank of America Merrill Lynch, Rothschild & Co. and Citigroup to find a strategic investor that would buy the entire stake at a premium to its stock market valuation, but the effort yields no concrete offers.

A 2018 plan to sell half the stake to a group of unnamed North American investors failed as well when they sought a discount on the already low valuation being asked for (equal to Hapoalim’s book value).

Like Housing & Construction, Hapoalim is under the shadow of an investigation, in this case U.S. authorities who accuse it (and other Israeli banks) of aiding clients to evade American taxes. The cost to Hapoalim, in the form of legal costs and set-asides for future penalties, has already reached 2 billion shekels..

Failing to find a strategic buyer, Arison received approval in September to sell Hapoalim shares on the TASE, meaning she won’t get the control premium on the sale price as she had hoped.

In November, she sold 4.3% of her stake to a group of Israeli institutional investors, leaving her with 15.8%. The price was 25 shekels a share, 5.7% below the market price at the time of the sale, for a combined 115 million shekels.

Hapoalim’s share price continued to be weighed down by the problem. Analysts say the bank may have to spend another 500 million shekels to settle with the U.S. this year or next, after which the share should begin to recover. It’s not clear whether Arison will wait for a turnaround before she sells.