"You're going to be king of the marketplace," one of Israel's bigger lawyers promised Nochi Dankner, as the deal to buy control over IDB Holding Corporation started to take form.
"I don't want to be a king," Dankner said quickly, knowing that it's open season on kings' heads in the markets.
Dankner won't be taking over as chairman of the IDB juggernaut for several months yet. But he overcame the first obstacle on Thursday, when his company, Ganden Holdings, signed the agreement to buy the controlling stake from the Recanati and Carasso families.
Last summer the Israeli business press dwelled extensively on how Leon Recanati and Joseph Grunfeld (who operated through the Kardan investment group) bought control of IDB Holding Corporation. Then the deal fell through.
Nochi Dankner's deal has much better chances of succeeding, for three reasons:
1. The hunger: Nochi Dankner is much more resolute, and hungrier, than Leon Recanati. Young Nochi would do anything to get his hands on IDB, one of the most powerful business groups in Israel. Unlike Leon Recanati, who does everything he does in a refined manner, Nochi will run riot from regulator to regulator and from bank to bank, in Israel and anywhere else it takes, to get the deal done.
2. The blood: The IDB shares in question originated with Leon's cousin Oudi Recanati, who decided he wanted out. Oudi didn't really want to sell them to his cousin's consortium, though. He was forced to by virtue of agreements granting first right of refusal to Leon, and also to preserve the family honor. But when he had an opportunity to kill the deal, he pounced on it. This time Oudi, the seller, will do everything in his power to close the deal: he has no bad blood with Nochi.
3. The partners: The partners Nochi's bringing to the table ¿ the Livnat and Manor families ¿ have money. They don't need to mortgage all their assets to scrape together the price.
Yet Nochi et al still have a lot of hurdles to overcome. The first is purely financial. Adding the credit the acquisition will require to the credit the IDB group companies have already taken out slams the IDB group straight into the regulatory wall. The central bank's Supervisor of Banks will hate allowing Israel's banking establishment to lend so much to a single borrower. Dankner and the supervisor will have their work cut out for them to circumvent this one.
The second hurdle is holdings Nochi and his father have in Bank Hapoalim, via Salt Industries. Nochi has stated that he will sell his shares. But the timing is dreadful for him, given the crash of the bank shares. In fact, the only feasible buyers for his Hapoalim shares are other scions of the Dankner clan. And their relationships aren't much better than those between Leon and Oudi Recanati.
More to Nochi than meets the headline
Although this deal is, as a headline would put it, "Recanati sells IDB to Dankner", it would be a mistake to see the deal as two old-money families transferring control.
Firstly, Nochi has been distancing himself from the other Dankners. If the deal is finalized, he will be relinquishing most of his holdings in family-related companies.
Secondly, Nochi and his father hold 49% of Ganden, the company through which Nochi is buying control over IDB. They have plenty of partners in the company, who expect results.
So the big question behind the IDB-Ganden deal is how well privately-held Ganden, which Nochi founded three years ago, has been performing. It has so far invested in real estate and Israeli tourism, two sectors that have been flagging. Nochi claims the group is profitable, but nobody has seen its financial statements, or knows how leveraged it is. Hence its performance is hard to estimate.
Some of Ganden's investors are not well known in Israel. Who in Israel has heard of Darko Horvat, the Slovenian wonderboy who established the Aktiva business group of Ljubljana? Well, Aktiva has grown into one of Slovenia's biggest investment firms. In any case, we may assume that Israel's capital market and banks will want to learn more about Ganden and its backers before blessing the deal.
If the deal is finalized, the management of IDB ¿ one of the biggest groups in Israel ¿ will change dramatically, after a very long time of stagnation.
That isn't only because it will be passing into the hands of a young man, only 48 years old, with a completely different temperament, a man who's been advancing with giant steps into Israel's marketplace. It's mainly because it is a leveraged deal being carried out at a pretty steep price at a time of economic crisis.
This means that Nochi won't have one second of grace. He'll have to knuckle down and shake up the group, with no hiatus before he starts generating major profit to finance the massive loans he and his partners will be taking out to buy IDB in the first place.
But it will be some four to six months before the deal is finalized. Until then, IDB will continue to careen along the bizarre path it's taken in the last few months: no daddy, no direction, but only a whole group of middle managers asking themselves what the next dawn will bring.