Paul Singer’s investment management firm Elliott Management has just purchased 4.8% of Israeli Telecommunications Company Bezeq for $205 million, Jewish business news reported.
“The fund believes that significant value can be gained if the right steps are taken to improve corporate governance…Bezeq has solid business fundamentals, exemplary manpower, and great potential, which makes us proud to be one of the largest independent investors in the company. We are eager to work with you to ensure that the company has the structure of the board of directors and the commitment to good governance to which it is worthy the fund stated regarding this latest investment.
Elliott management pointed out the urgent need for changes in the board of directors and serious changes within the company’s corporate governance, including immediate dismissal of several directors that are under investigation by Israeli Securities Authority The fund noted that Bezeq is held by a 3 tier leverage pyramid that creates many conflicts of interest and called for removing at least one level to create a greater identity between Bezeq’s corporate governance and economic ownership.
Bezeq was founded in 1984 as a government-owned corporation and was privatized in 2005. The company operates land line phone services, cellular services, and provides Broadband and pays TV services, with a total of over 3 million customers in Israel. Pelephone Communications Ltd., one of their subsidies was Israel’s first cellular service provider. Yes, another subsidiary is Israel’s only provider of multi-channel television broadcasts via satellite to subscribers; in addition to Walla! Communications, the most popular portal site in Israel, for news and email (similar to Yahoo).
Paul Singer’s Elliot Management, named after Singer’s middle name, has over $34 billion in assets under their management and is headquartered in New York City. They are considered a “Vulture fund”, since more than 1/3 of their portfolio are distressed securities, typically in debt, bankrupt or near bankruptcy. The fund was started in 1977 and over the last 40 years has “produced an extraordinary 14% average annual return after fees, nearly double the price appreciation of the S&P 500”, according to Business-Week.
Some of the firm’s largest investments have been Hess, Novell software, CompuServe, Wisconsin based retail chain Shopko, Vietnamese state owned ship builders Vinashin, and German hair product company Wella G. They are also well known for their restructuring of TWA, MCI WorldCom, and Enron.
By: Zev Sondheim