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Drexel Burnham Lambert junk-
bond kingpin Michael Milken.
And when Bankers Trust de-
manded Koor go bankrupt after
it had defaulted on a debt to the
investment bank, it was appar-
ent that the time had come to per-
form major surgery on Israel's
largest conglomerate.
"So we decided to sell," remi-
nisced Mr. Gaon. 'We had to close
down factories, with RIP — that
is 'rest in peace' — stamped all
over them."
In essence this meant launch-
ing — though not in one day —
the largest ever lay-off move in Is-
raeli history, with roughly half of
Koor's workers losing their jobs,
sometimes against the backdrop
of demonstrations, but generally
in a surprisingly calm setting. Ap-
parently, the sense of changing
times had permeated deep into
the Israeli psyche.
So much so, that when Mr.
Gaon decided to do what for
Koor's founders would have been
preposterous, i.e. replace the os-
tensible control of the workers
with the unabashedly greedy
ownership of Wall Street
financiers, hardly
anyone in Israel
raised an eye-
brow. Hevrat
Haovdim was
gradually wrest-
ed of its 71 per-
cent stake in
Koor, ultimately
selling roughly 20
percent of the con-
glomerate to U.S.-
based Shamrock
Corp. for some $250 million, and
36 percent to the public. The re-
maining shares are held by Is-
rael's large banks.
In 1991, after persistent losses
for half a decade, Koor returned
to the black, partially benefitting
from the financial arrangement
with the government and the
banks. However, this was against
a background of bank debts and
heavy financial commitments.
But Koor Industries has now
established itself as Israel's most
profitable industrial company,
topping in its net income all local
publicly-traded companies for 17
consecutive quarters. With some
30 subsidiaries and over 20,000
employees in Israel and around
the world, Koor's 1995 net income
reached $156 million on sales of
$3.3 billion. Koor shareholders
enjoyed a 24.5 percent return on
equity, and exports exceeded $1
billion for the first time in the
company's history, accounting for
over 7 percent of Israel's entire
annual industrial output and ex-
ports.
Now, with annual revenues of
some $3.7 billion, exports totalling
$1.5 billion, $1.1 billion in equity,
and profits in the region of $160
million, Koor is looking ahead to
the next century with a firm busi-
ness plan in mind, says Mr. Gaon.
The adopted principle is sim-
ple: Decide on your core business
and stick to it. Until recently
Koor had extensive interests,
ranging from food and footwear
to agrochemistry and tourism.
"But why would a foreign investor
want to put his money in my shoe
factory?" said Mr. Gaon. "If he's
going to invest in shoes, he'll look
to Adidas. So we must concen-
trate on the heart of our busi-
ness." And in the case of Koor,
that heart is primarily in the
high-tech, construction materials
and agro-chemical sectors.
The question for Mr. Gaon
though, as the company sells off
its non-core industries, is where
he can expand in a country as
small as Israel. Moreover, con-
sidering that cement monopoly
Nesher, and formerly privileged
Bezeq telephone suppliers Tadi-
ran and Telrad contributed the
lion's share to Koor's profits, the
company must now brace for a
post-monopolistic age, which may
soon result in a Japanese cement
producer operating in Israel and
has already produced new supply
agreements with Bezeq which are
far less favorable to Koor
than the deals it had
previously had with
the telephone com-
pany.
Mr. Gaon says
the future of his
company lies in
globalization.
The more Koor
will be geographi-
cally spread, the less
it will be vulnerable
to currency fluctua-
tions, which last year — with a
relatively strong shekel — hurt
the company's balance sheets.
Last year the company spent
$200 million in taking over com-
panies that will produce and mar-
ket chemicals in Brazil, Argentina
and Spain. Mr. Gaon says that by
the end of 1997, some 40 percent
of Koor's activities will be over-
seas and forecasts that the figure
will rise to 50 percent by the end
of the century.
In terms of Koor's global ex-
pansion, Mr. Gaon has very clear
likes and dislikes. Russia and its
environs are very definitely out.
Despite the huge influx of Russ-
ian immigrants, he feels Israelis
do not understand the mentality
of the new post-communist
regimes. It will soon be part of one
large European market, and
there is no doubt countries such
as Germany have clear geo-
graphic, linguistic and cultural
advantages.
As far as Mr. Gaon is con-
cerned, the focus is on the Far
East and its emerging markets.
The only large, non-core busi-
nesses currently owned by Koor
are in the tourism sector, includ-
ing substantial interests in Arida,
the Sheraton hotels, Isram and
Eurodollar. ❑
,
(c) Jerusalem Post 1997
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