Bethel Finance:Committee recommends dismantling some of Israel's business conglomerates

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The economic concentration committee delivered its final recommendations on Tuesday, which were stricter than the interim report delivered some months ago. In contrast to that draft report, the Apax Partners fund and the Ofer family fall into the category of business groups that must choose one or the other: finance holdings or industry. They are considered too big and influential to keep both.

Apax, an international investment fund, owns Tnuva, the biggest foods manufacturer in Israel, and Psagot, Israel's biggest investment house. The Ofers own interests in a slew of industries and in Bank Mizrahi-Tefahot.

The interim report had already singled out three tycoons - Nochi Dankner, Yitzhak Tshuva and Zadik Bino - as having to choose finance or non-finance (companies that provide goods or services). The addition of Apax and the Ofers, while short of a surprise, had not been obvious, but the committee tightened the criteria and they made the short list.

The chief problem with a huge business conglomerate owning both finance and non-finance companies is conflict of interests: The finance companies could lend to the real ones based on the interests of the figure at the top of the pyramid, not their own benefit. Also, the finance companies could deny credit to the real companies' rivals.

All the committee members agreed that big conglomerates must be barred from owning both, though there were arguments over criteria. Finally they decided that a "significant non-finance" company is one turning over NIS 8 billion a year, or with a balance sheet bigger than NIS 20 billion. A finance asset was defined as any company managing more than NIS 50 billion worth of the public's assets (savings, pension funds, provident funds and so on). And that is how Apax and the Ofers made the grade.

Tshuva is on the list for his holdings of Delek Group, which owns real estate and oil and gas exploration companies, the Phoenix insurance company and the Excellence-Nessuah investment house.

The committee gave the affected groups four years to decide and sell assets.

Business groups owned by Shari Arison and Mozi Wertheim, however, are spared. Arison owns the controlling interests in Bank Hapoalim and in Housing & Construction; Hapoalim passes the bar of being a significant finance asset, but H&C does not. Wertheim owns the Central Bottling Company ("Coca Cola Israel") and an interest in Bank Mizrahi-Tefahot. He gets to keep both.

The Azrieli Group had been on the cusp of inclusion: It owns 20% of the credit card company Leumi Card, as well as its malls business, but the group fell a hair short of the criteria.

In any case, the committee ruled that directors sitting on boards of finance companies may not serve as directors of non-finance companies as well. And that means no fewer than 43 people who sit on multiple boards of that very type must resign from at least one seat.