Taking Stock / The Man of the Hour

1. Nochi Dankner

For some 12 months now, Nochi Dankner has been the Israeli marketplace's Man of the Year, the last eagle who dared to soar on leverage, the only mogul machinating a massive deal, the only man in motion on the backdrop of a community in paralysis. Nochi Dankner is the man the market expects to shake up the mammoth IDB Holding after long years of inaction.

True, he hasn't closed the deal to buy IDB Holding Corporation just yet. He needs the deadlines to be put off a tad longer. He needs to sew up the financing, to tailor the last seams. He's just waiting for the umpteenth gathering of the Mivtachim pension fund's board regarding a loan; he has to make another presentation to Migdal Insurance over another loan; he can report progress in talks with First International Bank of Israel; on Monday, he has another meeting with Israel's supervisor of banks; the day after, he's scheduled to sit with the antitrust commissioner; but any day now, just a little longer, maybe he'll have to get the sellers to lower the price a bit more because potential lenders are balking: One seller says yea, the other says nay; but you can smell it, it's coming, it's getting nearer and nearer.

And then up pops Zadik Bino, not the Man of the Year or even the pipsqueak of the week, and announces that he's acquired control of FIBI, after putting $30 million on the table and promising another $60 million in cash when the official permits come through - no loans, no financing, no presentations, no Mivtachim, no tales; he just upped and bought Israel's fifth-biggest bank.

2. Ram Caspi

If you missed attorney Ram Caspi's stand-up shtick about Standard 15 and the Tel Aviv Stock Exchange, all we can say is, you missed out. Caspi, armed with his usual rhetorical capacity, poured scorn on the Standards Institute, which sought to force Israel's publicly-traded companies to record the book value of negotiable assets by their market value.

"Market?" he laughed, "Valuation on the stock exchange?" he sneered. "What stock exchange would that be? That silly thing in Tel Aviv with the absurdly low turnovers? Clearly, if control over a publicly-traded company changes hands, it will become apparent how detached from reality the market value is," he charged.

And on Sunday, that deal came about.

The sellers - two of the richest businessmen in the world, sages of financing, banking and international transactions. The buyer - one of Israel's most prominent businessmen. The merchandise - Israel's fifth-biggest bank. The price - half the bank's shareholders equity value, a mere few percent above its value on the Tel Aviv Stock Exchange.

If we factor in a control premium, then we learn that the Safras agreed to sell their bank for less than its market value - yes, that valuation on that silly old Tel Aviv Stock Exchange.

3. Yoram Eden

The prize for the fastest appraisal in Israel goes to - Prof. Yoram Eden. A few months back, as Israel Discount Bank labored to finalize its financial statement for 2002, it ordered an evaluation of FIBI, in which it holds a 26.4 percent interest.

Discount Bank hoped for an evaluation that would save it the need to write down its FIBI holding, and Eden delivered the goods. Fast as a speeding bullet, he ruled that FIBI was worth 109-134 percent more than its market value.

Discount Bank took his appraisal and told its accountants: We have a note from the professor; no need to write off zip.

That was quite an evaluation Eden wrote. It sports lovely Excel tables, capitalization prices and the choicest parameters from the world of financing. If you want, he'd be prepared this very day to defend his opinion on the bank's value, and why its market value is immaterial.

How does his appraisal sit with the fact that the Safras let the bank go for 60 percent less than Eden's evaluation? It sits beautifully. You have to understand that there is one price in ordered evaluations by third-party appraisers, and an entirely different one for deals in practice. They are two parallel series, and never shall the twain meet.

4. The Dankners

Yoram Eden and other appraisers have carried out several evaluations of major Israeli institutions in the last year, generally naming astronomical prices tens of hundreds of percent above the companies' value on the market. They weren't the only one to be slapped in the face by Sunday's deal.

Several of Israel's biggest businessmen, who spent billions buying interests in Israel's banks and biggest concerns, are reluctant to acknowledge that the conditions on the market have changed. In some cases, they can't afford to acknowledge the new reality because writing down their investments could trigger severe sanctions by the banks that lent them money for the deals.

Take the Dankner family, which continues to record the book value of its Bank Hapoalim stake according to the price it paid five years ago.

If the Dankners were to acknowledge the bitter reality as the Safras have, they would have to write off a tremendous sum that would embarrass them, Bank Leumi, which lent them the wherewithal to buy the Hapoalim interest, Bank Hapoalim itself, and the Bank of Israel, which is supposed to be supervising the lot of them.

5. The man of the hour

None of this means that the bank shares can't continue to rebound on the Tel Aviv Stock Exchange, returning to something closer to their shareholders equity value. Maybe they will. But investors in the banks will still have lost money because of the high interest rates they have been paying on their loans.

Then there's Zadik Bino, who's buying a controlling stake in FIBI for half its equity value. When its share recovers, he'll be able to boast a profit of tens of percent on his investment.

It isn't a matter of luck. For seven years now, Bino has steadily rejected every deal presented to him. One is "too costly", another is "risky." He really likes this deal, the one he just closed, but he wouldn't pay much for it anyway.

Just two weeks ago, he lost the tender for Blue Square Israel, after Dudi Weissman outbid him by 25 percent. Well, shrugged the contenders, it's no great trick to offer peanuts and never do any business.

On Sunday, Bino proved them wrong. While all the major players in the marketplace are leveraged up to their necks, and are entirely occupied with making their next interest payments, Bino chose to act. The moment he saw a toothsome opportunity, he pounced, grabbed it and gulped it down.