Taking Stock / Conflicted at Heart

1.MK Abraham Hirchson (Likud) doesn't give up easily. There is a conflict of interest between his activities on the Knesset Finance Committee and the vast debts his son Ofer owes the banking sector. Yet, he announced last week that he plans to resume chairing committee meetings on banking matters if the Knesset Ethics Committee doesn't rule on this soon.

The ethics committee is to review a complaint from the Movement for Quality Government which demands that Hirchson be recused from handling banking matters.

This week, Hirchson's attorney had a sudden brilliant legal idea - he is going to ask Ethics Committee chair Arieh Eldad, MK (National Union) to recuse himself from the debate on Hirchson due to a "conflict of interest".

And what exactly is that conflict of interest? Is Eldad also in up to his neck with the banks, you may wonder? Not at all. He has ideological conflicts of interest, smoothly explained Hirchson's flak catcher - Eldad opposes the disengagement plan and Hirchson supports it.

The Reader's Digest version - Hirchson believes Eldad cannot discuss him because they have ideological differences. Nonetheless, he is convinced that he can handle banking matters, despite his son having financial differences of opinion with the banks on the small matter of a few tens of millions of shekels.

2. Eyal Yona never rests. Not a month goes by without Gmul Investment's making headlines as interested in a huge investment in Israel, mostly taking over publicly-traded companies.

This week Gmul announced it is negotiating the acquisition of 35-40 percent on Engel Europe for NIS 70-80 million, just a few weeks after announcing that it is negotiating to buy Electronics Line.

What's the connection between these two companies? What is the idea behind the acquisitions and interest? It is difficult to find the logic - the only common ground all these acquisitions share is big cash positions.

What is the logic in buying a huge piggy bank if the price you pay is a premium over the contents of the bank? Of course you are only buying part of the company, but you have complete control of the kitty - distorted local exchange jargon calls it "control premium," the ability to control and direct financial resources that are not entirely under your ownership.

Eyal Yona bought Gmul in a very similar manner - he bought it through MPI with a corporate coffer of which he had taken control.

The method of buying publicly-traded coffers indirectly looks promising so long as the entrepreneurs continue to roll along and the financial market smiles on them. But stock exchange cemeteries are full of the bodies of companies and entrepreneurs that dealt in these kind of takeovers. In the end, the question is what they do with the money and how they make it create real returns.

3. The state budget is stretched and MKs want to stretch it even tighter. Disengagement is taking its bite, tax revenues have stopped growing, and the treasury is heading back to the drawing board to pore over minuscule bits that can still be cut.

But there are things for which it is never a problem to raise budgets and additions. There's former prime minister Ehud Barak's offices. This week the treasury submitted a request to increase that annual budget by half a million shekels to NIS 3.3 million - out of security concerns.

Why does Barak, a private businessman who has not been prime minister for four years and is engaged mainly in getting rich - need the state to give him a NIS 3.3 million office? When anyone here says "security concerns," everyone else rolls over and plays dead.

4. In a few weeks the $40 million that Yossi Maiman, Ron Lauder and Shlomo Ben Zvi promised when they got commercial television station Channel 10 out of bankruptcy proceedings will be gone. How did the money go so fast?

About half of it covered old debts to suppliers and to Maiman himself and the rest evaporated on the regular operations of a channel that burns about $2 million per month.

In recent weeks Channel 10 has managed to substantially improve its ratings and the result is that few now doubt its ability to survive. But those looking at the numbers know that it will take another $30-50 million to put this business in the black.

So what will happen? All the options are open except one, we think. Yossi Maiman, who has already put $70 million of his own money into Channel 10 is fed up. He does forecast the channel will be profitable in 2006, but his willingness to invest more money is near the limit.

Ben Zvi might not be fed up yet, but he doesn't have such deep pockets. So the only the only option left is Ron Lauder, the only remaining deep pocket in the area.

Of course Lauder himself will also not agree to carry the channel alone and he will also be looking feverishly in the next few weeks for someone to help him hoist the stretcher.