Our new dairy producer: Where's the outrage?
A Chinese government company is buying a
56% (and maybe more) stake in Tnuva, the formerly Kibbutz-owned monopoly on dairy products and fruit and vegetable sales in Israel.
The Chinese government's Bright Food Group signed an agreement this
morning to buy control of Tnuva Food Industries Ltd. from Apax Partners.
The sale is being made at a company value of NIS 8.6 billion while will
bring a profit of NIS 4 billion to Apax, which has a 56 percent stake
in the company, on which it will not be required to pay any tax.
As
it stands neither the kibbutz movement, which has a 23% stake, nor
Mivtach-Shamir Food Industries Ltd., a 21% stakeholder, will be part of
the deal, although there are ongoing talks on the matter. Any side that
pulls out of the agreement before completion will be required to pay NIS
140 million compensation to the other party.
As part of the agreement, Bright Food has to keep Tnuva's center of
operations in Israel, including management, production and development.
Furthermore, most members of the board of directors and management, and
the CEO will remain Israeli, while a representative of Bright Food will
serve as chairman.
These clauses will undoubtedly assist in easing
the receipt of regulatory approvals for the deal and will perhaps
prevent protests against the sale. It is unclear as to whether the
Israeli government will have the ability to enforce anything if Bright
Food decides to act differently in the future, bearing in mind that the
government was not a party to the agreement between Bright Food and
Apax.
How is this outrageous? Let me count the ways....
1. Why is the Israeli taxpayer - via the government - not getting a stake in the NIS 4 billion (about $1.33 billion) that Apax is making on the deal? Why is this transaction tax free?
2.. I could care less if Bright Food moves Tnuva's center of operations out of Israel if it means that there will be true competition in the dairy and produce industries. But there's no indication that will happen. Our food prices remain
significantly higher than just about anyplace else in the world - our dairy prices are
25% above the OECD average. This is the only country I know where the first thing they tell you to do if you're having budget problems is to cut soft drinks and milk out of your diet.
3. When is the former
Kibbutz monopoly (in which the Kibbutzim still have a 23% stake) to be brought to an end? What justification is there for such a monopoly in 2014?
4. Will we continue to get
sour milk for the company outing?
At the very least, approval of this deal should be conditioned on an end to Tnuva's monopoly on much of our food bill and a normal tax rate on the profits from this deal. It's simply outrageous.
Labels: Antitrust Authority, Apax Partners, Israeli economy, Tnuva
The Antitrust Authority does what the 'social protesters' didn't
While the 'social protesters' had a massive block party all summer, the Antitrust Authority (how many of you didn't even know we had one?) finally did the work that should have been done since the country rejected socialism by electing Menachem Begin 34 years ago. It investigated and found that - shock of shocks - our 'national dairy cooperative' monopoly has
engaged in price gouging of milk products (and lots of other products as well). Yes, that's them Tnuva, pictured on the left. Their chairwoman has now resigned (don't worry - she's still on the board) and as of Tuesday,
milk prices will be dropping by 15% from their current levels.
To put that in perspective, a liter of milk in a bag like the one pictured at left currently costs just under NIS 5 - the exchange rate is about NIS 3.7 to the dollar. You pay slightly more for 1% milk (which is pictured below) and nearly double if you buy it in a carton rather than in the less convenient bags. And oh, yes, you can buy two liters - but no more - in a carton. Nothing larger.
The move came after months of nation-wide protests against high dairy prices, including a boycott on cottage cheese.
Tnuva representatives stated that the price decrease came as a result of a decrease in the price of milk. [Nonsense! CiJ]
Cohen announced on Sunday that she is resigning her position, pending the conclusion of an investigation into the company by the Antitrust Authority.
Cohen stated that she wants to focus her attention on the investigation. She will continue in her role as manager of Apax Partners in Israel, the conglomerate that owns Tnuva.
She will also retain her position on Tnuva's board of directors.
Shlomo Rodev will take Cohen's place as Tnuva's chairman on an interim basis. Rodev formerly served as the chairman of Bezek's board of directors.
The Antitrust Authority opened an investigation against Tnuva last week. Cohen and CEO Arik Shore were questioned for not providing information requested by the authority. Antitrust Authority investigators raided Tnuva’s offices last Sunday morning. Withholding information from the Antitrust Authority is a criminal offense.
As part of the authority’s investigation into the dairy market, it asked Tnuva and other dairy companies for information. Tnuva provided information, but the authority concluded that Tnuva was concealing information and that it had not provided everything demanded. Antitrust Authority investigators confiscated documents and questioned senior Tnuva executives under caution.
The move happened now because Apax bought Tnuva from the countries' Kibbutzim (farming cooperatives), which gouged the Israeli consumer for more than 60 years for the sake of our socialist paradise. But now that it's been bought by outside investors, it's okay with the
branja to expose Tnuva as the monopolist gouger it has always been (Mrs. Carl's brother-in-law was driven out of the fruit market because as an independent, he was forbidden to market his fruit except through Tnuva, which paid a fraction of the market price). I guess that Apax didn't know that they were supposed to put into the contract that Tnuva would continue to be treated as if it were owned by the Kibbutzim.
YNet adds:
Cohen announced her resignation to Psagot's directorate Sunday morning and informed the board that she has also left her position at Tnuva. Cohen is caving in to immense public pressure on part of the consumers and an Antitrust Authority investigation against Tnuva. [Psagot is one of the largest investment banks in Israel. Cohen was its chairman as well until today. CiJ]
The role international Apax played in the decision is unclear; however, last week, the fund released a statement in which it announced that it stood by Cohen.
Cohen's position as active chairperson both in Tnuva and Psagot is unusual as in global Apax. Partners usually do not hold operational positions in the fund's portfolio companies.
The resignation announcement was met with disbelief both in Tnuva and Psagot. After playing a dominant role in both, Cohen's part in the management of the two Apax holdings will diminish considerably.
The importance to the Israeli economy of breaking monopolies like Tnuva cannot be overstated. For large families in Israel, your basic food budget can be 50% or more of what you take home after the outrageous taxes. That's why all those people were in the streets last summer. Prime Minister Netanyahu and Finance Minister Steinitz understand that nothing will help all those 'social protesters' more than lowering food prices. It's just a pity it took the country this long to figure that out.
Labels: Antitrust Authority, Apax Partners, Israeli economy, Kibbutzim, Tnuva
