Koor Industries (NYSE:KOR) CEO Jonathan Kolber isn't your typical Israeli businessman. His background is North American, his education is Canadian and he's also more soft-spoken than your regular Israeli executive. For all the troubles Koor and its affiliate ECI Telecom (Nasdaq:ECIL) have encountered, nobody questions his managerial skills. He's certainly shown a talent in the past for buying and selling companies at a profit.
But an increasing number of steps taken by Koor and ECI in the last year indicate managerial indecision and inconsistency. There were too many cases of Koor and Kolber starting something, and pulling back halfway.
A stellar example is the attempted hostile takeover of Nice Systems (Nasdaq:NICE), a move spearheaded by businessman Rimon Ben-Shaoul, who had just left the Clal investment group for Koonras Technologies of the Tel Aviv-listed Shrem Fudim Kelner group.
Ben-Shaoul, possibly together with SFK leader Itschak Shrem, managed to persuade Kolber to join them in the takeover attempt. Each purchased just under 5% of Nice's shares on the floor (5% is defined as a substantial stake, requiring the shareholder to report actions in the share to the authorities).
As is the practice in hostile takeovers, Ben-Shaoul suddenly announced that he and Koor were coordinating their steps, and together held a substantial amount of shares and demanded representation on Nice's board. Koor followed suit, releasing an announcement to the Tel Aviv Stock Exchange that same day.
Investors received the news with mixed feelings. Critics pointed to the troubles at ECI and the crash of Koor stock and wondered about the timing of the adventure.
One day later Kolber appeared to be having second thoughts. A second announcement to the TASE stated that Koor had bought the Nice shares, but did not demand representation on its board and was not coordinating its steps with Ben-Shaoul and SFK.
The options affair
Another example of Koor's chiefs bowing to public pressure was evident in the stock options affair. A month ago Koor's board agreed to reprice options held by Kolber and president Danny Biran, naturally in order to "reinforce the link between their compensation and the company's performance".
The uproar was immediate, not only against Koor but against the directors who had approved the deal ¿ including directors representing Bank Hapoalim, which owns 20% of Koor's equity. Within 24 hours Koor said that Kolber waived the repricing, though Biran had not.
There are other cases of Koor reneging from what seemed to be done deals. Three months ago Kolber and Itschak Shrem reached an agreement for Shrem to buy 20% of Koor. Most of the details had been ironed out, but then Bank Hapoalim objected and the deal died. Nonetheless, Kolber could have circumvented the bank and brought Shrem into Koor or ECI in other ways, if he'd really wanted to ¿ but he elected to avoid conflicts with Hapoalim.
Nor is that the worst. Over a year ago, as ECI's telecoms equipment market crashed and its share price sank through the floor, Koor had a revolutionary idea ¿ to create value for the floundering company by demerging it into five independent companies, which would then be floated on a stock exchange, sold, or shared with strategic partners.
The plan was in execution, whole managements had been chosen for each baby ECI, and talks were being conducted with potential partners for each of the fledgling companies.
Suddenly, a year later, with no earth-shaking change in the environment ¿ it transpired that Kolber was going in another direction entirely. No demerger, no public offerings of baby ECIs. ECI would remain a single company with a new strategic partner, who would be involved in running the whole enchilada.
The shareholders were not charmed.
This latest deal Kolber is cooking up also infuriated certain investors. Yesterday Koor and ECI officially confirmed that the Dovrat and Ofer families are negotiating a $50 million investment in ECI in exchange for a 12.5% stake.
UBS Warburg hadn't waited for the official admission. It had already fired off a decidedly uncomplimentary research note, saying the discount the new investors were receiving is unjustified, and their potential contribution to management is limited by their lack of experience in telecommunications. Worse, the market reacted on the spot, sending ECI down 14% on heavy turnover.
Might Koor bow again under the barrage of criticism? This time it looks as though the ECI-Dovrat-Ofers deal is sewn up. Under pressure from Bank Hapoalim, Kolber is also stepping down from the chairmanship of ECI for an international personality, ex-Nortel executive David Ball.
But Kolber continues to zigzag. Ball's appointment was confirmed just yesterday, but meanwhile he's in Europe and Kolber will continue to head ECI's Executive Committee here in Israel. The CEO, Doron Inbar, will continue to report directly to him.
Kolber has to make up his mind: Either he stays at the helm and bear the responsibility, for better or worse, or he hands the keys over to Ball and Shlomo Dovrat. He can't eat the cake and have it too.