www.bethelfinance.com
"Globes" report yesterday that Apax Israel CEO Zehavit Cohen wants to replace Psagot Investment House Ltd. CEO Ronen Tov has raised a storm in Israel's capital market in general and at Psagot itself.
However, sources inform "Globes" that Psagot chairman Ehud Shapira responded this morning by swiftly calling a meeting of Psagot's senior management including Tov to tell them that it was 'business as usual." He reportedly promised them, "as representative of the owners, I tell you that Ronen Tov is staying."
Some market sources believe that Shapira coordinated the move with Cohen in order to calm the situation at the investment house. Nor do Shapira's assurances necessarily mean that Tov will remain as CEO, while Cohen still sees him being replaced.
Psagot has been buffeted in recent years and the last thing it needs is an additional shaking up. An investigation two years ago by the Israel Securities Authority and the changeover in control at Psagot to Apax resulted in the removal of the highly esteemed CEO Roy Vermus. Then there has been huge public criticism at the high level of management fees. Other woes include the departure of senior managers and the 40% fall in the value of Psagot in Apax's financial report and dozens of employees are expected to be cut. Now comes the uncertainty surrounding Tov's future.
Sources close to Cohen say that she is disappointed that Tov did not stand in the forefront of the struggle against lowering management fees for provident funds. The recent decision to limit them is expected to hit Psagot's income. p>Tov and his staff actually did a lot on this matter: they prepared analyses and forecasts; they transferred data to the Ministry of Finance and to MKs; they worked behind the scenes through familiar channels; and they published articles. Except that, in the end, the decision on management fees bypassed the Ministry of Finance, so it's not clear how much Tov could have influenced the decision.
Unreasonable expectations to create value
There was sharp criticism of Cohen today in the capital market that she was considering replacing Tov after just one year in the position. There was agreement in the market today: Ronen Tov has not failed in his job; Psagot has not crashed in the past year, and has not suffered from heavy withdrawals. The investment house has been operating more or less in line with market trends in areas where the market has suffered from withdrawals, so has Psagot, and in areas where capital was raised, Psagot was also successful.
So why then did Apax write off 40% of Psagot's value in its most recent financial report? The reason is the original inflated price at which control of the investment house was bought (at a market cap of NIS 2.7 billion), which afterwards was revalued upwards to NIS 3.7 billion.
Market sources claim that Cohen set unreasonable goals for Tov: to create value for Psagot, when the current value listed on Apax's books was already exaggerated. At the same time, the capital market experienced a crisis, and regulations were eroding management fees. No manager can create value under these conditions, and certainly not after one year.
On the other hand, Tov knew what he was getting into. Cohen's aggressive style is well known, as well as her tendency to fire managers without thinking twice. This is what she did at Tnuva Food Industries Ltd. where she replaced two CEOs, and this is what she did to Vermus at Psagot, when along with the compliments she heaped on him, she did not hesitate to oust him the moment she understood that he might be an obstacle to close the acquisition of the investment house.
Market sources also believe that despite Cohen's desire to find a replacement for Tov, it will not be simple to find someone else like him. Cohen's image of a tough and involved manager, who has no problem firing a CEO that she herself appointed, is only getting stronger. Whoever she brings in to replace Tov will be fully aware of what happened to his predecessor.
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