Davidi's FIMI Sets Sights on Taking Over 3 More Companies

After acquiring the controlling stake in Retalix, Ishay Davidi's First Israel Mezzanine Investors (FIMI) now plans to gain control of three more publicly traded companies by buying up their shares. Over the course of 2009 it has been doing just that.

Capital market sources predict FIMI will not attempt any hostile takeovers, but will rather acquire a substantial holding in companies that have more than one controlling shareholder.

Indications of FIMI's plans were evident in the company's September 2009 report - which shows that two of its investment funds (FIMI 2 and FIMI 4) have invested $14.2 million in three publicly traded companies. The names of these companies do not appear in the report, as FIMI's holdings in each company are less than 5%.

FIMI is the largest private investment fund manager in Israel and has so far raised about $1 billion for four funds. The first two, FIMI Mezzanine Fund and FIMI Israel Opportunity Fund, have stopped making new investments. FIMI 2, which was set up in 2006, raised $300 million, of which about $250 million has already been invested. FIMI 4 was set up at the beginning of 2008 and raised $500 million, of which about $80 million has so far been invested.

Although 2008 was a difficult year for FIMI's funds - with sharp declines of about $28 million seen in the value of the funds' investments - by the third quarter of 2009, the company had regained most of those losses. In the third quarter of this year the fair value of FIMI 4's investments gained $4.4 million, or about 5.3%, to reach $86.1 million.

FIMI 2's investments were worth $245 million, which appears to be a decline of 2.5%, but this shrinkage was due to the disbursement of about $14 million in dividends - meaning the true value of the investment rose by $8.6 million, or about 3.5%.

Both of these funds are expected to record further improvements in the fourth quarter of 2009, thanks to sharp increases in the capital markets and the consequent appreciation of FIMI's publicly traded holdings.

The success of certain FIMI investments was offset by the dismal failure of others, although these failures affect the investment company's prestige more than its bottom line. One such investment was in Tefron, which is having serious cash flow difficulties.

Tefron, which manufactures seamless undergarments and swimwear and employs 1,000 people, has been under considerable pressure from the banks and is at risk of closure. Davidi owns 20% of Tefron, with Meir Shamir's Mivtach Shamir, via a jointly owned company called Norfet. The two businessmen bought the controlling stake in Tefron in 2004 for NIS 20 million, with each investing NIS 10 million. That investment has now been completely written off.

Davidi's other failed investment is in Leadcom, which is now being liquidated after the company could not meet its payments to bondholders. FIMI invested about $7.4 million in Leadcom, via its FIMI 2 fund; that investment is currently estimated at $150,000.