Taking Stock / Kolber Got His, We Can Wait

April 2002: Shares of the Koor conglomerate are near their nadir - the enormous leverage the firm took on itself in the 1990s in order to finance its investment in ECI is starting to hurt - and Koor is searching for any way in which to improve its liquidity.

Koor conducts prolonged negotiations over selling control of Elisra, a manufacturer of defense systems, to Elbit Systems at a valuation of $300 million. Elbit claims that the price Koor is demanding is too high.

June 2002: In a surprising development, Koor gets up from the negotiating table and announces that there is no deal. Elbit is surprised - it was sure that Koor needed the cash from the sale of Elisra because of the company's deteriorating situation. A week later, the mystery is solved: Israel Aircraft Industries (IAI), a government-owned company, announces that it is willing to buy 30 percent of Elisra's shares for $100 million. This is an incredible deal for Koor: It gets $100 million in cash, makes a capital gain of $60 million and still retains control of Elisra, whereas one of the conditions of the deal with Elbit was sale of its controlling interest.

May 2003: British investment group Hermes announces that over the last few months, it has bought over 5 percent of Koor on the market at prices ranging from NIS 60-90 a share and has become a substantial shareholder.

June 5, 2003: Koor announces that its board has decided to grant CEO Jonathan Kolber, Elisra Chairman Danny Biran and the rest of the company's management a new options plan. The package of 1.2 million options are exercisable at the low stock prices to which Koor's shares have plummeted during the last three years of enormous losses.

June 10, 2003: Koor's institutional investors are furious - they threaten not to approve the new options plan. Since 1998, when Kolber and Biran took over the reins of Koor, the firm's market value has dropped by $1 billion due to a losing, leveraged bet on the communications and high-tech sector.

June 27, 2003: Hermes, the new British investor that has an 8.7 percent holding in Koor, views things differently. According to Hermes, Kolber and Biran are a winning team - after all, Hermes bought its stake at an almost record low. Hermes votes for the options package, and Kolber receives 175,000 options at an exercise price of NIS 96 a share.

April 20, 2003: Avner Raz, who has served as CEO of Elisra for the last 10 years, denies that he is negotiating with Lumenis over an appointment as CEO of the failing high-tech medical equipment manufacturer, which is controlled by Arie Genger.

April 27, 2003: Avner Raz is appointed CEO of Lumenis. Market players are doubly shocked: First, because he chose to abandon Elisra immediately after IAI invested in the company, just when Elisra was supposed to be readying itself for takeoff. And second, because he chose to move to Lumenis - a loss-making firm with a NIS 1 billion debt to Bank Hapoalim that could close down any day.

May 2003: Lumenis solves the second riddle. In the report that it was required to file on Wall Street, Lumenis revealed Raz's employment terms. It turned out that in order to hire his services, Lumenis needed to pay him $1 million in cash for his first year. And Lumenis had to guarantee the whole amount in advance with bank guarantees.

August 2003: Raz isn't satisfied with just his contract with Lumenis - he files suit against Elisra for NIS 12.6 million. Raz contends in his filing that during his tenure as CEO, Elisra's market value rose from $25 million to $300 million.

November 2003: Raz and Koor reach a compromise - he receives an estimated $1 million in cash from Elisra in order to settle his lawsuit.

January-December 2003: Koor's improved liquidity, due to the $100 million it received from IAI, the rapid growth of subsidiary Makhteshim and big gains on the Nasdaq all lead to a reversal in Koor's stock price - and the share ends 2003 with a 240 percent gain. Koor's market value hits $650 million, but this is still only a third of its value at its peak.

November 26, 2003: Koor publishes financial statements for the third quarter of the year and reveals that not only was Elisra sold to IAI at a high price, it was sold just before a major downturn in the company. It turns out that Avner Raz left just in time, as Elisra announced a 14 percent drop in sales and a 25 percent fall in operating profit.

December 2003: Economists from Clal publish a valuation of Koor in which they estimate Elisra's value at $168 million - less than half of the value at which Elisra shares were sold to IAI. Even though the Tel Aviv Stock Exchange has jumped by 50-70 percent, Elisra has lost half its value.

January 5, 2004: Koor shares reach a new high, NIS 184 per share. Kolber's options, which he received only six months ago, are already worth NIS 16 million. Not a bad profit for the head of a firm that has lost over half of its equity in two years.

Kolber, Biran and even Avner Raz have just concluded an extraordinarily successful year. But Israel Aircraft Industries' shareholders had a less successful year. They will have to wait a very long time before they see their money again, if they ever do.