Taking Stock / Perspectives on Nochi

1. He loves it. Huge deals, surprises, triumph, applause, headlines. And he does it again and again. Not five days had passed since he shook hands with Joseph Safra in Geneva, closing a tremendous deal to buy the controlling interest in communications giant Cellcom for $720 million, and young Nochi Dankner smacked the market with utter astonishment yet again: His company Supersol offered to buy the Clubmarket chain for a billion shekels. That was double the next offer.

The billion-shekel offer rather confused people following the affair. Is Clubmarket worth that much? The bankrupt chain is suddenly worth a billion shekels? Maybe all that criticism against the management by the Boroviches and Yossi Rosen had been misplaced? After all, they must have bettered the chain in recent years - they lifted its value to double the sum for which they bought it.

Not exactly. In fact, not even close. Dankner, like the other bidders, offered to buy the company with zero debt. That is how you sell companies covered by a stay of bankrupcty proceedings. His billion shekels, if the offer is accepted, will go straight to the creditors - the banks, the suppliers and the workers, and he'd get the chain free of encumbrance.

When the Boroviches and Yossi Rosen bought Clubmarket four years ago, they may have paid half what Dankner is offering now. But they bought a live business with NIS 1.4 billion debt. Meaning, they figured the business was worth NIS 1.8 billion, which is double the price Dankner is willing to pay today.

Moreover, the price Supersol offered is much higher than Clubmarket's fair value to any other buyer. The merger of the two supermarket chains would create synergies and save costs.

In short, the price Supersol offered is the last proof, if anybody needed it, that Clubmarket had a negative value on the eve of its collapse. With the debt it carried on its back, it had no right to exist.

2.There is ostensibly zero connection between the two investments Nochi Dankner declared in the last month. Cellcom is a roaring business, a profitable and liquid member of the telecommunications world. Clubmarket is an enfeebled retail chain that has not proved to be able to generate profit.

But they have a common denominator: both are big business deriving all their income from the domestic marketplace. Anybody watching Dankner since he took over IDB Holdings in mid-2003 is surely not surprised. While his friends, Israel's other tycoons, look for their fortunes overseas, he likes to invest in Israel.

He bought Cellcom. He wants to buy Clubmarket. He bought shares in Bank Leumi and wants the controlling interest in the bank, while about it. He even toyed with the idea of buying Maariv.

In parallel, he has sold his holdings in export companies, where he had a minority position.

Why is Dankner looking inward while his cronies look abroad, while loudly complaining that you can't do business in Israel, and that regulation is the root of all evil?

Mainly because Dankner has done very well here at home. He made the biggest investment of all in Israel, buying the controlling interest in IDB with extraordinarily good timing, at the lowest point of the trough. His grousing friends made their local investments during the bubble days and took a pounding, which is why they are battered and bitter.

But, with all due respect to patriotism, Dankner still bears the burden of proof. In the last decade, most local businesses have generated moderate yields or less compared with investments abroad. The best investment company in years, The Israel Corporation, has a portfolio largely oriented toward exports. Africa Israel, whose shares have significantly outperformed the market, has also concentrated most of its efforts abroad.

If Dankner believes the Israeli marketplace is facing a boom, one can understand why he's buying local companies at prices that look pretty full. But if the Israeli economy continues to dither as it has for a decade now, we may find that in five years, IDB group shares will have generated average returns for investors. Average is a word that arouses fear and disgust in businessmen of Dankner's ilk.

3. While most tycoons like to complain about the regulators and the media, Nochi Dankner doesn't go there. It's a matter of character: Dankner is the kind who prefers to do business, not fight with the guards.

Dankner also has the knack of making friends. Not 24 hours after Supersol submitted its bid to buy Clubmarket, two astonishing things happened. The business pages hastened to explain that Dankner had trapped the antitrust commissioner, Dror Strum, who would have little choice but to approve the deal because the billion shekels would save the Clubmarket suppliers and workers.

Meanwhile, Strum, who usually sends clear signals against deals of the type, hastened to announce he was looking into the merger.

This might be a good time to note that Strum is not heading an employment agency, or a fund to rescue stiffed suppliers. The trustbuster's job is solely and only to create, protect and enhance competition in business.

If Strum decides to approve the Supersol-Clubmarket merger, he should explain exactly how that merger does not impair competition in retail, to the detriment of consumers. If Strum starts mumbling about workers or suppliers, he will be ruining the Antitrust Authority with his own two hands.