There is almost no area of the economy in which they can not be found. Be it hi tech, communications, real estate, commerce or even insurance. The Investment Company of Bank Hapoalim - the company whose controlling nucleus will soon be transferred to private hands.
In the next few days, if there are no unexpected hitches in the plan, Bank Hapoalim is to bid farewell to control of its investment arm, the Investment Company of Bank Hapoalim.
Amiram Sivan and the bank’s senior management are not willingly divorcing a share package constituting 23% of voting rights in Poalim Investments.
The amendment to the Banking Law requires Bank Hapoalim to reduce its holdings to no more than 20% of a corporation such as Poalim Investments by the end of 1999. In the first stage, by the end of 1996, the bank must reduce its holdings to 25% of the investment company, and will have to further reduce its holdings later.
Bank Hapoalim currently holds about 48% of voting rights in the company, and after the tender, it will give up 25%. After the Israel Corporation’s withdrawal from the tender, three groups are left in the race, the Dankner family, through Salt Industries and Dankner Investments, the Steinmetz family, controlling shareholder in the sister company Ampal, which is traded in New York, and the Dovrat-Shrem Group, joined recently by the Urdan Industries metallurgy company it controls.
Poalim Investments currently trades around the $155 million range, and Bank Hapoalim has set a minimum level for the competitors in the tender, that the bids must reflect a company value of at least $192 million.
What will the successful bidder in the tender receive? It should be emphasized that they will not receive complete control. Bank Hapoalim will retain 20-25% of the company, and will be able to appoint its own directors, who will be involved in ongoing developments and strategies in the company, which is currently managed by Uri Levit.
Poalim Investments, established in 1963, focused its business at first on financing activities. Since the beginning of the 80’s, a gradual diversification process has taken place in its business and in investments in new areas of activity. The company’s investment policy was to invest in various projects at all stages in the lives of the projects, from start-up to stable companies, already well-established and profitable.
Today Poalim Investments is an octopus with many holdings, frequently associating additional investors, including the public, in companies in which it holds a portion. It holds almost everything: industry, real estate, hi tech, communications, commerce, services, finance, advertising and even insurance. The successful group in the tender could become such a group, whose holdings reflect the entire gamut of activity in the economy.
Industry
- Teledata: Poalim Investments’ flagship holding is Teledata Communications Ltd. In the company’s balance sheets, which show investments in affiliated companies totaling NIS 420 million, Teledata is represented by the sum of NIS 60 million. Teledata was issued on Wall Street in 1992, and its market value is currently several million shekels above its value in Poalim Investments’ books.
Teledata ties in to the hi-tech category. The company develops and markets products in telephone communications for the local network environment. After a crisis that haunted the company in 1994, due to its failure to penetrate some of its prominent advanced products into the market, it successfully returned to profitability at the end of 1995.
Teledata, which contributed nearly 40% of Poalim Investments’ net profit in 1993, closed 1995 with sales of $32 million, which could grow by tens of percents this year. In Q4 ’95, the reorganization at Teledata sent the first signals that the company was back on the track to profitability, and in Q1 ’96, profits were already $1.1 million.
- Orlite: Another publicly-traded, industrial company is Orlite Industries Ltd. This company deals in the production of various metal products, primarily modular cupboards, bullet-proof ammunition stores for tanks, ballistic helmets, various aviation products, and more. In the first half of this year, Orlite posted NIS 2.7 million in profits on revenues of NIS 35.7 million, significant deteriotion compared to last year.
- Hazera: Poalim Investments bought its shares in Hazera Ltd from the Hamashbir cooperative in 1992. The other half of the shares are held by the Seed Growers’ Company, which includes a number of kibbutzim and moshavim.
Hazera, according to many estimates, could become one of Poalim Investments’ "bonanzas" when the company has a breakthrough. The company grows and markets seed for vegetables and field crops, both for export and for the local market. Its sales volume is expected to rise above $50 million in 1996, and, as the company isn’t public, there is no accurate information about its profitability, except the important fact that in 1995 it posted net profit.
Hazera also has potential to go public, primarily due to the company’s nationwide real estate holdings. No one disputes the fact that Hazera’s real estate holdings, along with Ophir Holdings’ projects, about which more will follow, were a consideration in entering the tender.
- AGA: The industrial holdings also include AGA, in which Poalim Investments holds 12% of shares issued on Wall Street in 1995. Poalim Investments already posted a profit by converting shares it held in AG Associates (Israel) into AGA shares just before the New York public offering.
AGA manufactures equipment for the semi-conductor field, which piqued global interest at the beginning of 1995, proving enough to serve as a springboard for the company’s issuance. Later, world giants, including the Israeli Tower Semiconductors, reported decreases in their profit forecasts, eroding these companies’ market value.
- Ophir: AGA and Teledata are not the only hi-tech companies in which Poalim Investments took advantage of their technologies and the dreams latent in them for raising capital and profits. Ophir Holdings, active primarily in the real estate field, enjoyed the US offerings in 1994 and 1995 of DSP Group and DSP Communications.
One of Ophir’s promising holdings is Memco Software. Hapoalim Investments recently announced preparations to issue Memco on Wall Street. Memco manufactures and markets security software for Unix computer networks, and Ophir increased its holdings in the company a few months ago. A hint as to Memco’s future value can be found in the US Platinum Technology Partners recent acquisition of a 10% share at a company value of $100 million. If we are dealing in capital gains, Memco could certainly contribute to Poalim Investments in this field.
Communications
The communications industry is one of the dominant ones in Poalim Investments’ basket of holdings. The company was interested in broadening its activities in this developing field through competition in the tender for the second cellular telephone operator’s license, but lost.
EuroCall: But Poalim Investments doesn’t give up, and established EuroCall at the beginning of 1996, in partnership with Bell Atlantic, the Swedish Telia and the Israeli Eurocom. EuroCall is participating in the Ministry of Communications tender for the international phone services license for two new operators, who will compete with Bezeq.
Matav, Reshet: Poalim Investments’ appetite to invest in the communications industry apparently stemmed from the success of two of its profit generators, Matav, which operates the cable television network in Israel, and Reshet, one of the three franchisees for Channel Two’s commercial television broadcasts, about whose success one need not be verbose.
It should be noted that the two companies’ revenue turnovers are growing at outrageous rates, and their profit growth has not been left behind. Matav, which recently raised $50 million in New York, closed the first half of this year with NIS 140 million in income and profits of NIS 17 million.
Matav recently joined one of its parties at interest, Dankner Investments, and is about to acquire, for $40 million, 20% of RP Telecom, which will establish a telephony network in Poland. In the same breath, it is possible to mention Poalim Investments’ holdings in Emitel, which is constructing a telephone system network in Hungary, in which Bezeq and the Hungarian national phone company are also partners.
Reshet closed 1995 with revenues of NIS 118 million and profits of NIS 16 million. In September 1996, Reshet will begin broadcasting on Saturdays also, which could increase revenues, but Poalim Investments doesn’t estimate with any certainty that this will affect its profitability.
Reshet enjoys the ballooning profits Channel Two’s advertising yields. On the other hand, Reshet’s growth damages that of the Maximedia Group, which deals with billboard advertising.
Real Estate
Ophir Holdings: One of the investments granting Poalim Investments’ business a stable form, alongside adventures in hi-tech and venture capital, is the above-mentioned Ophir Holdings, which, aside from the investments in DSP and Memco, sinks most of its efforts into real estate.
Ophir is currently a partner in projects to construct office buildings in Kiryat Arieh in Petah Tikva, and in Tel Aviv, and directly holds13% of the public Industrial Building Corporation. Ophir also has indirect holdings in Industrial Building, through Mivnat, which was established by Bank Hapoalim, the Diur group, a subsidiary of the bank, and the Jerusalem Economic Corporation, which is owned by Eliezer Fishman. Ophir holds 18.75% of Mivnat, which holds 52% of Industrial Building, which almost consistently increases its profits from year to year.