Why Rodav Quit Tnuva: He Took the Long-term View, Say Cronies

Not only do the controlling shareholders disagree over Tnuva's management, they are also disputing the company's value.

Shlomo Rodav resigned as chairman of Tnuva Food Industries this week because the company's owner, Apax Partners, felt he wasn't shaping policy in a way that would best serve the international fund's interest of selling its stake. Short-term profit was being sacrificed for the long-term view, which was not conducive to obtaining the highest price possible for the Israeli food company.

As one Tnuva source put it, Apax wanted a marionette on strings and that does not descrieb Shlomo Rodav.

Shlomo Rodav
Ofer Vaknin

Apax bought the controlling interest in Tnuva in January 2008. Rodav was appointed six months ago to replace Zehavit Cohen, who as chairwoman had become publicly identified with Tnuva's belated and flailing response to consumer protests against high dairy prices.

Rodav took steps that diminished Tnuva's profits in the short run, though they were designed to boost profit in the medium to long term. For instance, he shut down the company's dairy in Romania, which had been running at a loss. The NIS 136 million charge Tnuva booked for the drop in that dairy's value is key to the company reporting shrunken net profit of NIS 50 million for 2011, down from NIS 494 million in 2010.

But steps that depress profit in the near run do not serve the interest of selling Tnuva at the best possible price, from Apax's view.

Also, Apax did not appreciate Rodav's intention of instituting efficiency measures in distribution, which triggered a labor dispute with the union representing Tnuva employees. That in turn caused supply disruptions throughout the past two weeks, causing Tnuva to lose NIS 15 million to NIS 20 million in sales. At first workers refused to distribute cottage cheese to retail outlets, a disruption that was later expanded to include the company's chocolate milk and eventually all Tnuva products, though the union resumed distribution ahead of Passover, which begins tomorrow.

Apax, which owns 56% of Tnuva's shares, felt Rodav's moves were suited to the long-term interests of Mivtach Shamir, which owns 20.7% of Tnuva, and that of the kibbutzim and moshavim that still own 23% of the company, rather than to its own interests.

Not only do the controlling shareholders disagree over the company's management, they are also disputing Tnuva's value. In late February the Giza Singer Even accounting firm appraised Tnuva at NIS 5 billion. Apax values Tnuva at NIS 7.9 billion.

It would suit Apax if Tnuva was worth more, so it could get more for its stake. It would suit Mivtach Shamir if Tnuva was worth less, so it could pay less for any shares on the block that it buys. Rodav reportedly didn't think he could sell the company for that high price, said a source near the parties yesterday.