June 19, 2020

One Goes Up and the Other Goes Down

TheMarker | Capital Market

The brothers who are boosting the company’s value - and the investment manager who failed

The Salkind brothers inherited Elco Holdings from their father and presently their actions have resulted in a 110% jump in three years ■ On the other, Zehavit Cohen may cause Apax to sell Psagot to investors in Europe and the US - a move that results in a loss of several hundred million shekels

Michael Rochwerger

The ones that go up: Mikey and Danny Salkind

Brothers Danny, 59 (left) and Mikey Salkind, 53, inherited 64% of Elco Holdings (-1.75% 12940) after their father's death three years ago, which was then worth about NIS 1.4 billion. Many in the capital market doubted the ability of the brothers - who serve as Elco's co-CEOs and chairmen and directors of its subsidiaries - to enhance the group’s value or even maintain the status quo.

However, with the realization of assets and shares of the subsidiaries, the brothers managed to reduce Elco's leverage to a minimum; The value of the Electra group (-0.66% 166400) has already reached more than NIS 6 billion; Electra Real Estate (+ 0.18% 1676) has repaid its debts; Electra Consumer (+ 0.15% 8513) sold Golan Telecom to Cellcom (-0.15% 1290) for more than NIS 300 million; And its subsidiary, Supergas, had a public offering of 25% this week at a value of NIS 960 million - more than twice as high as last year's purchase price that Supergas paid to the Azrieli Group. All the actions resulted in a 110% jump in Elco's vale in three years, to NIS 3.73 billion, of which NIS 2.4 billion sits in the brothers' bank account.

The One that Goes Down: Zehavit Cohen

Ten years have passed since Zehavit Cohen, director of the Israeli branch of the private investment fund Apax, led one of largest transactions in Israel of the global Apax - the acquisition of Psagot Investment House for NIS 2.5 billion. But as the years have passed, Cohen's plans - to raise management fees in Psagot's pension fund activity and to acquire an insurance company - turned out not to be feasible de facto. Following this and due to relatively high leverage, Psagot had difficulties in showing high profitability, and the Corona crisis only made matters worse - which led the fund to seek a way out from its investment in Psagot.

Cohen is currently negotiating with a group of investors from Europe and the US that is willing to buy the Psagot shares for about NIS 1.3 billion - and to assume a debt of approximately NIS 550 million. Taking into account that since the purchase, Apax took out dividends of approximately 500 million NIS, if the sale shall indeed be completed - Apax will get out of Psagot with a loss of several hundred million shekels.

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