Aaron Frenkel does it again

Aaron Frenkel credit: Eli Etkin
Aaron Frenkel credit: Eli Etkin

With a huge gain on the Bank Leumi stake he sold this week, the Israeli businessman again proved why he is the shrewdest investor on the TASE. "Globes" examines his remarkable track record and current investments.

On Tuesday, Israeli businessman Aaron Frenkel sold a 2% stake in Bank Leumi (TASE: LUMI) through J.P. Morgan for NIS 1.4 billion. The sale netted Frenkel a capital gain of NIS 610 million, including dividends, in less than three years.

Frenkel has probably been the most outstanding financial investor on the Tel Aviv Stock Exchange (TASE) in recent years, with three dream rounds that have resulted in him buying and selling shares for large sums and in relatively short periods of time. An examination by "Globes" found that the sale of Leumi stock this week, and the earlier sales of shares in income-producing real estate company Bayside Land Corp. Ltd. (Gav Yam) (TASE:BYSD1) and drone company Aeronautics, have earned him profits totaling almost NIS 2 billion, since he began investing on the TASE in 2018.

The current sale of shares in Bank Leumi comes 30 months after Frenkel invested nearly NIS 1 billion in a third of the shares issued by the bank in June 2022, an offering in which international investment giants and leading businessmen in Israel also took part. Leumi's shares have risen by about 50% since the offering, mainly over the past year. After the sale, Frenkel still holds a 0.5% stake in Leumi.

Why did Frankel sell the Leumi shares now? Sources close to him say, "He strongly believes in Leumi and in his opinion it is one of the best banks in the economy and that the bank's shares still have 'a way to go,' but here was the opportunity - an offer from J.P. Morgan, and he decided to sell. No one has ever gone bankrupt if they exited before the peak."

NIS 90 million gain in drone company

Frenkel (68) lives in Monaco today. He was born in Bnei Brak and studied in the Ponevezh Yeshiva. He began his business career in the 1980s by purchasing food factories, and later expanded his activities to include aerospace, real estate, and energy worldwide. In recent years he has become astute at identifying opportunities on the TASE, which included takeover potential (Aeronautics and Bayside) or in correctly predicting economic trends (Leumi).

At Bayside, his most profitable exit to date, Frenkel managed to build a position that threatened the control of Property and Building Corp. Ltd. (TASE:PTBL), which belongs Discount Investments (controlled by Tzachi Nachmias and the Salkind brothers). In mid-2022, after the stock soared because of the developing battle for control, Frenkel sold the shares he had purchased to Properties and Building (about 37% of Bayside's capital) for NIS 3.1 billion, at a premium of tens of percent over the market price. The deal brought him NIS 1.25 billion - a return of 100% on his investment.

Previously, he had made a handsome exit from drone manufacturer Aeronautics. The Yavne-based company had found itself under investigation at the end of the previous decade due to a security scandal in which it became embroiled. Its shares crashed, and Frenkel seized the opportunity. He quickly amassed a position of about 30% in Aeronautics shares, while a battle to acquire it began to develop between Israel Aerospace Industries and a consortium of Rafael and Avichai Stolero, which led to a surge in the share price. Eventually, Frenkel sold his Aeronautics shares to the latter consortium in 2019, securing a capital gain of about NIS 90 million.

The upside in the Tamar gas field

Alongside these three positions sold at a profit, Frenkel currently holds two other stakes in major companies in Israel. The largest position is in the offshore Mediterranean Tamar gas field. Frenkel holds directly and indirectly (through shares in Tamar Petroleum (TASE: TMRP)) about 20% of the rights in the field located offshore from Haifa - in which he has invested NIS 3.4 billion in total.

He has directly purchased about 14.5% of the rights in the gas field, through transactions with Mubadala Petroleum, which is owned by the Abu Dhabi government, as well as from Harel Insurance and Finance and the Israel Infrastructure Fund (at the end of last September). He also bought 25% of the shares of Tamar Petroleum, which controls 16.75% of the field. This may be where his biggest profit to date lies, since the value of the reservoir was estimated at $8 billion (NIS 28 billion) according to Frenkel's latest transaction. This value reflects a potential profit for Frankel of over NIS 2 billion.

Buoyed by his success with Bayside, he entered another deal last October in the income producing real estate sector by buying shares of Alony Hetz (TASE: ALHZ), which controls Amot (TASE: AMOT), which has real estate in Israel, the US and UK, and Energix Renewable Energies (TASE: ENRG). Alony Hetz, led by CEO Nathan Hetz, had seen its share price fall by more than 40% in the past three years prior to Frenkel's entry into the company, amid rising interest rates that have hurt the value of its assets abroad.

In the investment, which was agreed upon with Hetz, Frenkel purchased 10.2% of the shares through a share allocation (a 10% premium over the market price), and later purchased another 2% of the company's shares from the Phoenix (TASE: PHOE), which increased his holdings to 12.1% today (he also has options that, if exercised, will increase his holdings to over 14%). All of this for a total investment of NIS 800 million.

Frenkel believes in Nathan Hetz and the entire Israeli economy

Since making the investment Alony Hetz's share price has been floundering and not rising sharply along with the TASE and Frenkel's stake is now worth NIS 827 million.

Why did Frenkel invest in Aloni Hetz? Those around him say that "he believes that Aloni Hetz is an excellent company that was built over forty years. Its subsidiaries are among the largest and most successful in the fields of income-generating real estate and green energy. Frenkel definitely thinks that Aloni Hetz is managed correctly and well by Nathan Hetz and his management team." And yet, with his investment there, those around him say, he will bring "new ideas with a vision for the company's future. There are interesting things that can be added to improve its assets."

What other areas interest Frenkel today? Those around him say that "Israeli high-tech interests Frankel, especially artificial intelligence (AI). Data centers too. On the economic level, he believes that there is work to be done to restore the north and the south, and also to restore public morale. Frenkel thinks that Israel's economy needs to be strengthened. This is a region with huge potential for investments. With all the crises and the war that has taken place here, the Israeli economy has proven to have strong resilience. He strongly believes in Israel and continues to invest here."

Published by Globes, Israel business news - en.globes.co.il - on January 23, 2025.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.

Aaron Frenkel credit: Eli Etkin
Aaron Frenkel credit: Eli Etkin
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