Please note what has happened since Apax Partners acquired control of Tnuva Food Industries Ltd. Although we were told that this was a foreign investment in the Israeli economy, today almost every consumer knows that there is no bigger bluff. Apax acquired Tnuva in order to get rich on our backs. Its calculations were to get rich quick, and it took the easiest path to do so - it picked our pockets.
Apax is responsible not only for the rising prices that have hit us since the acquisition, but also for making exploitation of the Israeli consumer ingrained in market practice. It did not examine what it ought to charge for a product, but how much it could get away with before the product was thrown back in its face. It also very quickly realized that because Tnuva is a monopoly that that won't happen. Nor did it happen, until a series of "Globes" exposes revealed the truth to consumers, causing the cottage cheese protest.
Now Apax is laughing at all of us: it is leaving Tnuva with a profit of NIS 4 billion that it extracted from the Israeli public, and will pay zero tax on it.
The Israeli government has had countless opportunities to change this flawed tax policy, which gives huge tax breaks to financial investors who contribute nothing to the economy, but, regrettably, it has not done so. Now, Tnuva, Israel's largest food company with a monopoly in the dairy market, is changing hands. This time it is not going to a private equity fund, but to Bright Food Group, which is owned by the Chinese government. Please note the price that Bright Food is prepared to pay for Tnuva and work out for yourselves how long it will need to make a return on the investment, and also ask, how? With Apax, we discovered the method too late, and we would be naive to think that Bright Food expects to make a return on the investment solely from overseas development.
Those who favor the deal claim that the knowhow and technology of multinationals are advantages, and that Bright Food is making a long-term investment. There are two comments to be made on this point. One, both Nestle SA (SWX:NESN), which acquired Osem Investments Ltd. (TASE: OSEM), and Unilever plc/NV (LSE: ULVR; Euronext: ULA), which has acquired quite a few Israeli companies, including Telma and Strauss Ice Cream, are here for the long term. Both companies learned up close how to milk the Israeli consumer, and both shared in the exploitation.
However, in the case of Bright Food, this is not the whole story. It is owned by the Chinese government, which has interests well beyond business interests. The best example of this we saw in the lawsuit filed by two bereaved parents, Yekutiel (Kuti) and Cheryl Weltz, against the Bank of China, which they accused of financing terrorism. Their late son, Daniel, was murdered in a terrorist attack in Tel Aviv. A defense establishment employee, Uzi Shaya, was due to testify in court that the Bank of China knew that the money being transferred through it was being used by Hamas and Islamic Jihad. However, pressure was reportedly put on the Israeli government to prevent Shaya's testimony.
The documents that the Chinese were compelled to provide revealed that, in November 2010, Israel assured the Bank of China that his alleged incriminating testimony would not be heard in a US court. Shaya, needless to say, did not testify.
Now imagine how the Chinese government could use control of Tnuva to pressure Israel, and how its control could paralyze the Israeli government from taking measures to restrain Tnuva's monopoly power and high prices in the market.
Published by Globes [online], Israel business news - www.globes-online.com - on May 22, 2014
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