The Excellence Investments investment house continues to expand. Today, it acquired Nessuah Zannex, paying NIS 24 million for an 85% stake. The price reflects a NIS 28.3 million company value for Nessuah Zannex, 11% below the current price on the Tel Aviv Stock Exchange.
The Nessuah Zannex owners - Proventus, managing director Eran Goren, and chairman Rami Goren - negotiated with a number of local and international concerns for the sale of control in the company. Excellence Investments made the most attractive offer. According to the memorandum signed today, Eran Goren and Rami Goren will receive call options for 25% of Nessuah Zannex at the sale price in the current deal, plus interest. The options are valid for 90 days from the date the acquisition is completed.
”Globes”: What do you plan to do with Nessuah Zannex?
Excellence Investments co-owner and chairman Roni Biram: ”After the acquisition, we plan to identify the synergies between overlapping activities and combine marketing and managing efforts. We want to become the largest brokerage group in the local capital market. The acquisition is being made through our Excellence Zmiha Securities and Investments subsidiary.”
Will the firms be merged, or will they remain separate entities?
”It’s still too early to tell what we’ll do. We hold 75% of Excellence Zmiha, and Rothschild Asset Management (RAM), our British partner, owns the rest. Nessuah Zannex has business that can fit in with ours, such as portfolio management, funds, work with overseas clients, and so forth. We have no prepared plan. After we complete the acquisition, we’ll consider our future business.”
The public holds 15% of Nessuah Zannex. Do you have any plans to publish an offer to purchase for it?
”At present, we have no such plans. I daresay it will happen later, but we haven’t talked about it yet.”
What other plans have you in store?
”Nothing else at the moment. Nessuah Zannex is a pretty big fish to swallow; it will take time. Nessuah Zannex has a fine reputation, and we’ll have to learn how to use it to promote the group’s business. It will take time and resources, so we have no other plans to expand right now.”
What about Nessuah Zannex’s operations, such as its research, banking, and other divisions?
”Everything’s proceeding normally right now, and I believe that most of the company operations will continue in the future. After all, we didn’t acquire Nessuah Zannex to save money for Excellence Investments; we did it to expand our business, and position our group as a market leader in Israel. In order to achieve that, we’ll continue these activities, and fit them in with Excellence Investments’ current business.”
Swedish company Proventus controls Nessuah Zannex, which trades on the Tel Aviv Stock Exchange at a company value of only $7 million. Proventus acquired control of Nessuah in 1997 from YLR Capital Markets of the IDB Group and businessman Shlomo Eisenberg. Eliezer Carmel and Muli Avisar founded Nessuah Trading & Investment in Securities in 1997.
After acquiring Nessuah, Proventus merged it with Zannex, founded by Eran Goren, Rami Goren, and Elie Nahum. Nessuah Zannex, the merged company, specialized in high tech, investing in the US and Europe, among other things, through cooperation with US investment house Piper Jaffray.
Nessuah Zannex did not have an easy time on the capital market, however, and its situation has worsened in recent years, with the market in general, particularly where high tech was concerned. In the past two years, Nessuah Zannex’s results have been hit hard, with revenue plunging to NIS 22.6 million in 2002, compared with NIS 29.5 million in 2001 and NIS 45 million in 2000. The sharp decline in revenue was also reflected in the firm’s bottom line. Nessuah Zannex lost NIS 16.5 million in 2002, following losses of NIS 11.5 million in 2001 and NIS 5 million in 2000.
The firm’s heavy losses have cut its shareholders' equity in half, to NIS 28.5 million as of December 31, 2002, compared with NIS 44.8 million as of December 31, 2001.
Nessuah Zannex is not the only investment house hurt by the capital market downturn. Almost all the companies in the industry have reported losses, with one exception: Excellence Investments, controlled by CEO Gil Deutsch (30.7%), chairman Roni Biram (29.8%), and United Mizrahi Bank (TASE:MZRH) (26.2%). Not only was Excellence Investments the sole firm to report improvement in 2002, compared with 2001; its performance was outstanding by any measure.
Excellence Investments specializes in foreign currency, through its Excellence Global Markets subsidiary, and the Tel Aviv 25, through its Ofmat Investments subsidiary. The company reported a NIS 73.3 million profit last year from ordinary activities, compared with only NIS 43.9 million in 2001.
Excellence Investments’ net profit, however, declined 12.5% to NIS 12 million. In addition to a rise in management and general expenses, minority interests in companies consolidated by Excellence grew during 2002, notably in Ofmat, of which Excellence Investments holds only 50%. Furthermore, the company issued shares in Excellence Global Markets guaranteeing a percentage of the company profits to that subsidiary’s CEO, Jacob Harpaz; these shares granted Harpaz 25% of his company’s profits. This means that the profits from Excellence Investments’ two most significant activities are divided between the parent company and other entitled parties, which reduced the company profit for 2002.
Published by Globes [online] - www.globes.co.il - on April 30, 2003