Taking Stock / We're Idiots

"Anyone who thinks we sold Housing & Construction cheaply is an idiot." (MK Haim Ramon, testifying in court on Sunday)

A moment of proper disclosure: We're idiots. We will explain the many reasons why further on. But first let's explain what the whole thing is about.

In 1996, the "New Histadrut" sold the controlling interest in Housing & Construction to the Arison investment group at a company valuation of NIS 300 million. The Arisons took the controlling stake and the company's workers got about half the company's shares. Now we will explain why we're idiots.

We're idiots because back in 1996, when the parties finalized the convoluted deal in which the New Histadrut, chaired by Haim Ramon, sold control over the biggest real estate company in Israel, Haaretz claimed the price was ludicrous. Two years later the company registered for trade on the Tel Aviv Stock Exchange at a valuation of NIS 1.2 billion, four times the price Ramon squeezed out of the buyer, Arison.

We're idiots because after perusing Arison's investment portfolio, and that of other holding companies, we can hardly find any examples of investments whose value quadrupled in two years.

We're idiots because back then, we pointed to the contorted process by which the company was sold to Ted Arison, without any tender being held, for NIS 300 million. Yet two different appraisals of H&C, by Yaakov Gadish and by the accounting firm of Somekh-Chaikin, estimated its worth as double or almost triple that. We're idiots because we thought it a little strange that the lowest appraisal, on which the deal was ultimately based, was made by an appraiser who did business with H&C.

We're idiots because we thought the whole story that H&C had negative shareholder equity and only Arison wanted the thing was idiotic. Every Tom, Dick and Yossi knew that H&C had the biggest reserves of land in the nation, which were booked in its balance sheet at laughably low prices. It was true, too, as proven by the fact that after seven years of crushing crisis in the real estate sector that ruined some of the biggest companies, H&C is still trading at a market value of NIS 1.2 billion, after handing out dividends of a quarter billion shekels.

To shore up his argument that he got a terrific price for the company, Ramon argued this week that its workers (who bought the company together with Arison) "were suckers."

Gracious, again we're idiots. Our calculations had shown that the poor sap employees netted about NIS 650 million gross, or NIS 400 million, from the H&C shares they bought in that controversial deal.

We're idiots because we can't think of a single case of suckers like these, most of whom are blue-collar workers, from overseers to steam shovel operators, who netted hundreds of millions from their company's takeover. Nor is this DSP Communications or Check Point Software Technologies, this is a construction company.

Ramon claimed that H&C chief executive Uzi Vardy-Zer received 3 percent of the company's shares in the deal, while he had "expected to receive 5 percent, as Benny Gaon got when selling the Koor Industries concern."

Idiots again! To the best of our recollection, Gaon got his 5 percent only after the Shamrock group acquired control of Koor. Gaon got his shares at Shamrock's expense, while Vardy-Zer's 3 percent was part of the basic deal in which the Histadrut sold control to Arison, without a tender. We're idiots because we thought that when the CEO and chairman get their chunk in advance, it smells of mediation fees.

By the way, Vardy-Zer is definitely no idiot. His shares in H&C are worth $10 million today.