The Shekel Drops / Double, Double Toil and Dankner Trouble

Nochi Dankner has only himself to blame: for partners bailing out, a shaky financial standing, enormous debts, public pressure, regulatory intervention and a damaged reputation. He's responsible for all of this.

It could have been different. Dankner set out with IDB in 2003 just as the Israeli and world economies were embarking on what was to be a relatively long period of expansion. Everything worked in his favor: Surging financial markets lit the way, and he enjoyed plenty of leeway from his perch in the Azrieli Towers. Indeed, in the early years Dankner took advantage of circumstances: He grasped the fact that big international money was seeking an outlet in Israel, and he aimed to be first wherever he went. Everything moved fast: He bought and sold companies of impressive proportions at a remarkable clip and disbursed billions in dividends. Almost every serious deal in the country landed on his desk, but the two most important ones were the purchase of the collapsing Clubmarket supermarket chain - giving Super-Sol control over that retail market - and the decision to take over Cellcom, which operated then in a noncompetitive environment.

Nochi Dankner - Moti Kimche - 26012012
Moti Kimche

IDB became a group of monopolies and this was for Dankner the best way to make money in Israel. He was on top of the world when the watchdogs and politicians allowed that to happen. He also mobilized part of the media which lionized him, even crowning him "man of the year" on occasion.

Dankner's largesse following the Second Lebanon War helped him foster government and municipal ties. Behind the scenes he kept tightening his bank connections, enlisting former regulators and politicians, and shoring up his position in the business sector. Performance was somewhat mediocre, but his domination of markets that were not particularly competitive did the job - whether in the areas of finance, cement, retail chains, or telecommunications.

In 2007 Dankner still had his ear to the ground when it came to the world economy and understood that the expansion trend wouldn't last forever. He began preparing the business for winter, raising billions from the public, exchanging short-term debt for long-term and also stopping the purchase of new assets. When the 2008 economic crisis rolled around Dankner was set. While other tycoons dangled like chimes in the wind, he projected stability and solid judgment.

He was able to continue paying his managers and cronies their huge salaries, to control his directors, to carry out financial and accounting capers - and to pull off outrageous insider deals. With unbridled arrogance, as concern over the economic crisis began to wane, Dankner gambled hundreds of millions of dollars on land for a gigantic casino in Las Vegas, bought Israir Airlines from himself, took over the Maariv newspaper, and wagered billions on Credit Suisse bank stock.

At first it seemed he would emerge unscathed from the bubbling stew he cooked for himself, but in the past year it's become clear that Dankner needs to change his tack. He's also begun projecting panic - reporting a NIS 1 billion bond buyback while at the same time trying to sell bonds on the market. Meanwhile, his old partners have begun squirming in their well-upholstered seats.

Until not long ago the Livnat family suffered silently, but when public pressure and plummeting image combined to hurt business, they started heading for the exit. Four months ago everyone denied they were separating, but the truth has finally emerged.

With the picture looking black, Dankner explains today that he's selling companies and leaving core fields because of the interim recommendations of the economic concentration committee, and because of his long-standing strategy of expanding investment abroad.

Really now? Almost all the international activity of Makhteshim Agan Industries was sold off to the Chinese, and the concentration committee actually recommended selling another company altogether: Clal Insurance Enterprises Holdings.

Dankner is selling because he has no choice: Under his management IDB has nearly reached a dead-end.

In the previous decade Dankner was king of the world: in communications, in the business sector and in government offices in Jerusalem. Dankner of the millennium's second decade will be much weaker, his influence will wane, and he'll be working hard just to pay back debts. In this inhospitable environment he'll cross paths with Lev Leviev, who went through a similar process three years ago; Yitzhak Tshuva and his Delek Real Estate; and Ilan Ben-Dov - whose hopes of being a tycoon have been disappointed.

But not all is lost, and it's even possible the worst is behind Dankner. He has many more maneuvering options. He could still sell Clal Insurance at a nice profit and make a few more pennies on the Credit Suisse investment. If markets recover he could also go back to making deals as he enjoyed doing in the past. It's important to keep in mind that, unlike other businessmen, Dankner hasn't reached the point of debt settlement.

Reducing the IDB pyramid is a good move, not just for the economy, but for him as well. It was too large, too monopolistic, too aggressive. It needs a strict diet and more focus.