Taking Stock / At the Right Price

DAVOS - No. Nobody's talking about investing in Israel this year.

Aside from technology, in which Israel's brand is still strong enough to weather the terrorism and the Palestinian uprising, interest in Israel in general, and in investing in Israel, is zero.

But there is one man, one of the more prominent participants in this year's Global Economic Forum, who hasn't given up. On the contrary, he insists that he will invest in Israel, that this is the best time to invest in Israel, and that he's going to be expanding his investment team in the Holy Land.

Sir Ronald Cohen, chairman of Apax Partners Holdings, which secured $4.4 billion a year and a half ago for its latest fund, has earmarked $600 million of that for investment in Israel.

Unlike most of the conference's participants this year, Cohen's knowledge of the Israeli economy extends beyond "high-tech" on one hand and "terrorism" on the other. He knows about its companies, people, opportunities and risks. These very days Apax is negotiating with the Dankner family over investing in multichannel television provider Matav Cable Systems (NASDAQ:MATV).

While Cohen refused to discuss specific investments in the offing, he was prepared to share his views on investing in Israel. The following are excerpts from a conversation with Ha'aretz.

First of all, why target Israel?

Prices are down, Cohen says. There is a liquidity crunch and anybody with a long-term view can see the time is ripe.

Prices are down? Our impression is that the banks and business community is doing everything in their power to keep prices artificially high.

Yes, that has been happening. There are some business that want to bring in partners or sell businesses but don't want to, or can't, acknowledge the market value of their assets, for various reasons. But if people are realistic, we will invest.

And you feel there are people prepared to admit to the low prices?

Yes, I think there are several Israeli groups that badly want to divest assets now, and are prepared to be realistic.

One of your partners visiting Israel declared he wanted to look at media investments. But income of all the companies in that sphere has been shrinking.

Which is what creates the opportunity. Media is an area intensely affected by economic cycles, because of its dependence on advertising and consumption. We think the Israeli economy is close to rock-bottom, which is the time to invest.

Media companies often demand extremely high prices irrespective of their real value on grounds of distinction, ego and prestige.

That is true, but chiefly of the printed press. I don't think we'll be buying any newspapers in Israel, though sometimes you can pay a high price for a newspaper, and sell it at an even higher price.

Will you be investing in the Israeli cable TV arena?

Cable TV is a good business. Everybody knows the cable companies had a few bad years, in Israel and everywhere. But they'll recover. It's a question of price.

Israeli businessman say this isn't the time to invest because nobody knows when the economy will hit bottom.

We don't agree. At the right price, investments should be made. What differentiates us from other investors is apparently our size. We manage a lot of money and our perspective is long-term. Our fund's range is 10 years. We don't have to publish quarterly reports, so we can afford to think long-term.

How will you finance your investments in Israel?

Technology investment in cash, direct to the companies, of course. Investments in mature companies are usually made 35 percent in cash and 65 percent in bank credit.

Israeli banks have become reluctant to extend non-recourse loans, after coming a cropper on leveraged buyouts.

If it's a good business at the right price, I think Israeli banks will give us the credit to finance the deals.

What kind of returns do you expect on investments in Israel?

The same returns we expect on investments anywhere - 25 percent to 30 percent a year. No less.

That's a lot. You must be optimistic about the Israeli economy to expect that kind of yield.

Yes. It's clear to everyone that the current situation of the Palestinian uprising can't last forever. It could go on another two, three years. I can't say when it will be resolved, but clearly after the United States finishes with Iraq, it will turn its attention to the Israel-Palestinian conflict. I don't know when it will happen, it could be a surprise. But nobody expected Oslo either.