It is possible something new will happen tomorrow on Israel’s capital market. For the first time, something is about to happen here that has so far only happened in the US, and even there only rarely. The public is about to force its will on the management of a public company and organize a putsch.
The company in question is Mashov Computers controlled by Jack Dunietz and David Assia (30%), and the putsch is expected to take place during Friday’s shareholders’ meeting. Three prominent brokerages are behind the move, Dovrat-Shrem, Dor-Berger, and Apex-Mutavim. The three, acting in unison, hold 42% of capital shares for themselves and their clients and plan tomorrow to use their voting power to torpedo a planned deal to bring the Shamrock Investment Fund into Mashov as a strategic partner.
The three hope to bring in a different partner under exactly the same conditions; they are not revealing the name of the other prospective partner. The other prospective partner is a public company that deals in the same field as Mashov, software, and the three feel this partner can contribute to Mashov what Shamrock cannot, strategic partnership.
It should be noted that Shamrock is also supposed to come into Mashov as a strategic partner. However, the three brokerages claim that Shamrock’s added value as a strategic partner is limited: Shamrock is not in the computer business, and Mashov can expect to be swallowed up in Shamrock’s massive investment portfolio without even being noticed. The brokerages feel Shamrock’s contribution to Mashov will be in one field and one field alone: money, the $15 million Shamrock is expected to inject into Mashov in exchange for 35% of capital shares.
"Mashov has a liquidity problem, and we do not take Shamrock’s cash lightly, but Mashov’s key problem is not money. Subsidiary Magic has already raised $9 million from private investors, and burned all the money. We see that Magic, with sales in 35 countries to 500,000 customers, still can’t seem to turn a profit, even though in the software industry sales turnover of that volume should have meant profits ages ago. The problem is management, not cash."
The three brokerages claim many computer sector investors were interested in Magic, due to its development and marketing successes, and point out that even Mashov itself had reported being approached concerning investment in the company.
"Raising the cash that Magic and Mashov need is not a problem so we are not afraid to say no to Shamrock, because we know there are others willing to take Shamrock’s place under exactly the same conditions. The difference from Shamrock is that these others can supervise the Mashov management and prevent repeating the same mistakes."
Also the fact that this concerns Shamrock which recently rushed out of its Koor investments in a panic, also deters the brokerages from bringing the fund in as a strategic partner. In their opinion, Shamrock proved itself with Koor to be an unreliable partner.
Published by Israel's Business Arena January 22, 1998