The exchange of blows between Gazit-Globe Ltd. (TASE: GLOB) and the Bronicki family over the appointment of external directors at Ormat Industries Ltd. (TASE: ORMT) continued over the weekend. Ormat's board issued an initial response to the claims raised by Gazit of defects in the way the board is run, while the Bronickis responded to statements by Gazit-Globe executive vice-chairman Dori Segal by saying that "Gazit's claims are marked by low familiarity with Ormat's field of activity, and their actions are not beneficial to the company."
While Gazit-Globe chairman and controlling shareholder Chaim Katzman and the Bronickis, who founded and control Ormat, continue to squabble, it seems that the institutions, who hold the balance of power in the struggle, have yet to formulate a position. From conversations with sources in several institutions, it emerges that they have still not made up their minds about the control battle between the two sides, and are waiting to see concrete proposals from Katzman before deciding. "There are no goodies and baddies in this fight, only differences of approach," one source said.
The battle resumed on Thursday, when, in advance of a meeting due to be convened in three weeks time to confirm the appointment of external directors at the company, Gazit attacked the way Ormat has been run over the past few years, and proposed to other candidates for the external directorships.
In response, Ormat issued a statement in which it said, "Gazit's comments and ideas have been seriously and thoroughly examined by the company, in routine discussions both of the management and of the board, and a meeting has been arranged for July 7." The company added that it 'rejects Gazit's claims of incompetence on th part of board members," and pointed out that Ormat had been selected as a model public company, because of "excellent management over time, leading to exceptional success in a competitive environment."
In a joint interview, Yehudit Bronicki and her son Yoram Bronicki, who is president of Ormat, comment on Gazit's harsh statements about the company.
Yoram, were you surprised by the step Gazit took?
"Gazit wrote to us raising ideas and proposals similar to those in the position paper, and we arranged to meet with them the following week. It is surprising, and disappointing, to see that they preferred to turn to the media. It is generally accepted that if you want to solve a problem, you don’t do it by approaching the media."
On the claim raised by Gazit concerning the company's deficient management backbone, Bronicki says, "This claim is supposedly based on facts, but it has no substance. We are a company of more than 1,000 employees, with hundreds of managers at various levels."
The company's management method changed 15 years ago?
"Fifteen years ago, we underwent a revolution, and changed from an equipment manufacturer, with ups and downs in accordance with the projects we supplied, to owners of power plants. Today we have a portfolio of 13 complexes that produce 520 megawatts, and annual revenue of $250 million," says Yehudit. "This revolution entailed change in the company's structure, which became utterly different. As far as R&D activity is concerned, we have a geothermic field search and development team of 130 people, including people with high scientific qualifications."
"It's easy to float these claims," Yoram adds, "but since Gazit did not carry out any due diligence procedure before they bought the shares, I'm not sure what the basis of their information is."
As for Gazit's claims of weak financial management of Ormat, Yehudit says in reply, "In 2008-2009, the world underwent one the deepest financial crises ever, and Ormat experienced no difficulty in raising the resources required for its activity throughout this period. If you look at other energy companies, that either had to retrench in this period or else needed cash and took loans at 14% interest, Ormat was ready for the crisis from the point of view of financial management, which I acknowledge is conservative and risk averse."
Since Gazit invested in Ormat three years ago, the share price of subsidiary Ormat Technologies (ORA), which is traded in the US and holds the company's main activity, has fallen 30.4%, while the ETF that tracks green energy companies, PowerShares WilderHill Clean Energy (PBW), in which Ormat has a 2.5% weighting, has fallen 62.8%. However, in the past year, Ormat has underperformed the ETF.
Are Gazit's calims about the decline in the share price unjustified?
Yoram: "Gazit's aggressive action continued for several months, and boosted the share price, and they themselves are responsible for part of the damage they incurred. This was while the defensive action we took (buying Ormat shares to the tune of NIS 600 million) was carried out in one day."
Yehudit: "Gazit expressed very trenchant positions about the company's actions, but what marks their claims is low familiarity with our field of activity, and with what really goes on within Ormat. In 2009, we sold more power than in 2008, and we estimate that, barring extraordinary events, we will sell more power this year than in 2009."
In response, Gazit stated, "Gazit Inc. regrets that the controlling shareholders in Ormat continue to avoid dealing in a serious and businesslike fashion with the substantial problems Gazit Inc. has brought to the surface, the position paper sent to the company.
"Gazit Inc.'s conduct over the past three years, since it invested in Ormat, demonstrate unambiguously that the company had no intention of taking over Ormat. The sole object of the Bronicki family in raising this claim in interviews with the media is to divert the discussion and attention from the problems Ormat has been stuck with in the past two years.
"Gazit Inc. welcomes any move to bring in a worthy strategic partner to invest in Ormat, as hinted at by Dita Bronicki in interviews she has granted."
Ormat responded to Gazit's response today, saying, "Gazit is trying to disguise its attempt to buy influence in Ormat and dictate they way it is run. The company will report on a position paper that answers one by one all the claims and proposals put forward by Gazit Inc., in addition to the board statement on Thursday that contained initial responses to Gazit's claims, and extensive interviews in the media, in which responses were given to the claims raised."
Ormat also points out that the two external directors proposed by Gazit, Yuval Yanai and Gad Arbel, have both work and personal ties to Gazit-Globe vice chairman Arie Mientkavich. Yanai is currently CFO of Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN), while Mientkavich, who was formerly chairman of Israel Discount Bank (TASE: DSCT), is now executive chairman of Elron Electronic Industries Ltd. (Pink Sheets: ELRNF; TASE: ELRN), which controls Given Imaging. Arbel is a director of Discount Bank. According to Ormat, Gazit is making a crude attempt to put its people on Ormat's board.
Published by Globes [online], Israel business news - www.globes-online.com - on July 4, 2010
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