A low-key notification to the Tel Aviv Stock Exchange (TASE) last week marked the end of the division of assets between the Ofers, Israel's richest family. Shopping mall owner Melisron (TASE: MLSR) reported that its chairperson Liora Ofer had completed the acquisition of full ownership of Ofer Investments, the controlling shareholder in Melisron, after buying out her brother Doron Ofer.
This marked the end of a 20 year saga in which the founders of the Ofer economic empire - the brothers Sammy and Yuli - strove to divide up the assets that they had accumulated so that when the day came, there would be no quarrels and friction among their children.
Sammy and Yuli Ofer both died in 2011 and their plans to prevent arguments were only partially successful because there was a serious dispute between Yuli Ofer's two children Liora and Doron after his death.
Ultimately the dispute was decided by the courts which ruled that Liora would hold control of Ofer Investments through which she would control Melisron, while Doron was left with a 15% stake in Ofer Investments.
Last week Liora Ofer bought Doron's stake in Ofer Investments for an estimated NIS 500 million, mainly with a 4% stake in Melisron. She now has a 100% stake in Ofer Investments.
After last week's report, Liora Ofer said, "The decision will allow each of us to develop our family businesses with our own children. I thank Doron, my brother, for the good spirit in the business separation process, and I wish him and my nephew that they will be blessed and succeed."
The hope: minimal family conflict
The Ofer family business empire, which today encompasses shipping, real estate, fertilizers and energy businesses with an overall estimated value of more than $25 billion, was founded by Sami and Yuli Ofer in the middle of the 20th century. As the years passed, the two sought to separate their assets so that Sammy's children Idan and Eyal, and Yuli's children Liora and Doron, could continue leading the businesses they would leave behind with a minimum of friction.
Sammy and Yuli Ofer were born in Romania and were brought to the country as infants in the 1920s. They built their own shipping company, which became the basis for their business empire. In 1950 they bought their own first small ship and subsequently founded a company in partnership with local shipping magnate Mordechai Meno.
Over the decades the Ofer's shipping fleet expanded and they also branched into real estate and in the 1990's they became part of the controlling core of Mizrahi Tefahot Bank through the Ofer-Wertheim Group.
At the end of the 1990s, the Ofers acquired control from Shaul Eisenberg of Israel Corp. (TASE: ILCO), whose holdings included ICL (TASE: ICL: NYSE: ICL), (formerly Israel Chemicals) which produces potash and other minerals from the Dead Sea and phosphates from the Negev. The offers also acquired Oil Refineries (BAZAN) (TASE: ORL) from the state as well as shipping company Zim Integrated Shipping Services Ltd. (NYSE: ZIM), which after some difficult years has become Israel's most profitable company.
The solution to struggles: separation of powers
In 2002, when Sammy and Yuli Ofer were in their late seventies, they decided to split the assets they had so successfully built over the years. They faced a range of family disputes that has surfaced over the years between members of the second and third generations that had been spoiling relationships within the family and wreaking havoc on the businesses the brothers owned.
The Ofer brothers' solution was a clear separation of powers. Initially in 2002, control Israel Corp., which until then had been held in equal parts by the two brothers, passed to the control of Sammy Ofer and his sons - Idan and Eyal. They got 80% of the controlling shares, with Sammy paying Yuli in cash for the stake. The rest of the holdings were divided between Sammy's sons, and Yuli's children Doron and Liora.
In the other areas in which the brothers operated, mainly the international shipping business and the holdings in the controlling core of Mizrahi Tefahot Bank, there was no change. As for Bank Mizrahi Tefahot, at the end of the day it was the Concentration Law that ultimately left it in the hands of Eyal Ofer, Sammy's son. Since the death of the brothers, and in the 20 years that have passed since the division of their assets began, it has become clear that Sammy Ofer's sons own assets worth significantly more than Yuli's children.
This is in part due to the expansion of real estate and shipping activities by Eyal and Idan overseas and their increase in value, as well as the boom in the ICL's business activities due to commodity price rises, and the improved performance by Mizrahi Tefahot and energy production company OPC Energy (TASE: OPCE).
On the other hand, the income producing real estate sector (Melisron) that Yuli and his children focused on, has also grown well, but less dynamically. Over the years since the management of the family business was transferred to the members of the second generation, most of the large investments that were held in their hands have been significantly enhanced. According to Forbes the total value of their assets has doubled to $25 billion. Forbes says that Eyal Ofer has assets worth an estimated $14.4 billion, while his brother Idan's assets are worth an estimated $9 billion. Following the losses on stock markets over the past year, these assets have fallen in value from $15.4 billion and $10.5 billion respectively over the past year. According to Forbes their cousins Liora and Doron are a long way behind them in terms of wealth. Liora Ofer is worth $1.6 billion while Doron does not feature at all on Forbes list.
Shopping mall company Melisron continues to grow
Nine years after they divided their assets Sammy and Yuli Ofer both died in 2011, and fulfilling the vision they had envisaged was put to the test. The results in Yuli's family, it soon became clear, were exactly what the brothers had feared: a bitter dispute erupted between Liora Ofer and her brother Doron, which affected their stakes in of each of the two major companies belonging to Ofer Investments.
In July 2012, Doron Ofer had started a legal battle designed to cancel the will according to which he received only 15% of the shares of Ofer Investments while Liora received a controlling 51% stake. Their cousin Eyal Ofer held a major stake. Doron sued for half of the late Yuli Ofer's shares in Ofer Investments, which at the time held shares in Melisron and Mizrahi Tefahot Bank, claiming that his father had promised him half of the ownership in the company in a previous will.
The relationship between Doron Ofer and his sister Liora and their father Yuli was considered complex even before the father's death. For years, Doron Ofer was presented in the media as someone who acted contentiously in various disputes. For example, when then Supervisor of Banks Rony Hizkiyahu demanded that members of the family increase their capital in Ofer Investments, to support its holding Mizrahi Tefahot Bank, Doron Ofer conducted tough talks to sell his stake to the rest of the family, which was ultimately unsuccessful. As far as is known, Doron built a major part of his business away from the family in the field of real estate.
The inheritance battle that led to the legal conflict between Liora and Doron was decided at the end of 2015, when the court dismissed Doron's suit, leaving Liora Ofer with clear control of the holding company. Ofer Holdings main asset, which has posted strong growth over the past decade is income producing real estate company Melisron, which owns one of Israel's biggest chains of shopping malls. Ofer Investments currently has a 47% stake in Melisron, with shares valued at NIS 5.4 billion on the TASE. Back in the days of Yuli Ofer, Melisron first grew by using the land it owned on the former Ata textile factory in Haifa Bay to build the Karion shopping center. The company subsequently conducted an aggressive acquisition campaign, using leverage that included purchase of control of the Ramat Aviv mall in Tel Aviv for about NIS 1 billion from Africa-Israel.
Another major deal completed by Melisron was the acquisition of shopping mall chain British-Israel from Poju Zabludowicz and Leo Noy for NIS 1.7 billion, making Melisron one of the biggest Israeli companies in the sector. As for the part of the controlling core of Mizrahi Tefahot Bank, which was owned jointly by Sammy and Yuli's children, the concentration law dictated that owners of banks could not also own companies in other industries.
This left Eyal Ofer, who has no other substantial public holding in Israel, as most of his businesses are spread worldwide, as the only Ofer left in Mizrahi Tefahot bank's controlling core. He is the richest of the four cousins. As part of the same transaction, Eyal purchased the shares of Liora and Doron in Bank Mizrahi Tefahot and sold to the two his stake in Ofer Investments (33%), which owns Melisron. Thus the separation plan initiated by the brothers Sami and Yuli Ofer 20 years earlier has been completed.
Published by Globes, Israel business news - en.globes.co.il - on January 8, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.