It is now quite clear that the Trump group of the US is continuing to strengthen its standing in Israel. Following the takeover of control in Gmul a week ago for $400 million, the group has now become the major shareholder in listed Teuza Venture Capital Fund.
The group, which operates overseas, mainly in the US, in a wide range of sectors, including financial services, retail, medical, communications, Internet and real estate, has recently acquired Teuza shares for NIS 20 million, according it a 13% stake in the fund. Founded in 1992, Teuza ended 2000 and the first quarter of this year with a handsome profit.
The solid fund, managed by Avi Kerbs, ended a third consecutive year with profits totaling NIS 17 million (profits for 1998-2000 totaled NIS 72 million). The profits came mainly from the sale of its holdings in two companies, Sagantech, developer of microelectronic chip software and NESS, developer and manufacturer of neuro-electronic stimulation systems.
Kerbs told “Globes” today that the move was initiated by Teuza and that they were notified at every stage of the acquisition. “We found a serious investor with a warm Jewish heart, who is familiar with investing in Israel. I’m proud that a large established group like Trump decided to put so many eggs in our basket. I believe it will boost Teuza’s growth and lead to it become stronger and more dominant than before.”
Teuza has so far invested an overall $26 million in 13 companies. It sold part of its investments in eight of these companies, while in three others, it has written them off, and one company (Nova) issued shares on Nasdaq. With a 12.3% stake, Nova Measuring Instruments (Nasdaq: NVMI) is one of Teuza’s most outstanding investments.
Nova, which deals in integrated process control systems for the semiconductor industry, issued shares on Nasdaq in April 2000 at a company value of $285 million. Teuza’s investment cost NIS 5.6 million, and the market value today is $11 million. Even after the plunges on Nasdaq, this is a handsome improvement.
Another interesting Teuza holding is in Ormit (7%). This company, developer of a photo-resist prototype for the semiconductor industry, was sold a week ago to Applied Materials for $25 million, bringing in $1.7 million to the fund.
The Trump group recently completed acquisition of control of investment company Gmul. Under the deal, Eddy and Jules Trump, together with Israel representative Yakir Gabay, exercised their option to buy 67% of Gmul from provident and pension funds in the Bank Hapoalim and Hevrat Ovdim group. The Trump group paid NIS 400 million for the shares, a 20% premium of Gmul’s capital. The sellers remained partners in Gmul after the deal was completed.
Trump family representative Yakir Gabay (whose wife belongs to the Trump family) holds 13% of Gmul shares, purchased for NIS 78 million. Gmul’s prospectus shows that Gabay is negotiating with the Trump group for credit to purchase his share in Gmul. These negotiations have not yet been concluded.
The Trump brothers were unknown on the capital market only a few months ago. Excluding unsuccessful attempts to do business with Motti Zisser and Yitzhak Tshuva, the two did not make any substantial investments in Israel. The Gmul deal was arranged for them by Yakir Gabay, who succeeded where other well known concerns had earlier failed
”We made a strategic decision to invest in Teuza for entirely different reasons, although because the fund invests in the high-tech sector, obviously our involvement in this sector will grow.”
“Globes”: Why then did you decide to increase your stake in the fund to 13% and become the leading shareholder?
“We decided to invest in the fund because we believed it would be a strategically interesting . The fund’s business interested us greatly, both from the sales already made and those not yet made. Furthermore, one of the major factors in our decision to make the move is the fact that the fund’s ownership structure is very spread out and it was therefore easy to attain an influential position at a low investment.”
Is the group planning to increase its holdings in the fund or other Israeli companies?
“No concrete decision has been made concerning further investment in Teuza, although it is certainly a question of price. In the event that an impression was created that there is a connection between acquisition of control in Gmul and the current deal, it is mistaken. There is no connection; Trump reviews each case on its own merits.”
Published by Israel's Business Arena on 7 June, 2001