Tnuva – Israel’s largest food manufacturer and distributer, a household name and icon since 1926 – is about to be sold to Bright Food, China’s second- largest food conglomerate and a state-controlled one at that. Calling Tnuva Israeli may not be totally accurate, since the dairy company has not been Israeli-owned since 2007, when kibbutz shareholders sold a 56 percent stake to the London-based Apax Partners investment firm.
The British firm raised Tnuva’s value, mostly by raising product prices (helping to spawn the 2011 social protests) and large land transactions.
Now Apax is selling its stake after having made huge profits, mostly from selling valuable Tnuva real estate.
Apax bought Tnuva for NIS 4.3 billion and it is now worth an estimated NIS 9b.
The sale will not generate tax revenue because of exemptions geared to attract foreign investors and complex corporate structures put in place to exploit these measures. Thus the state loses an estimated NIS 500m.
What did Israel gain from Tnuva’s initial sale to foreign holders? Not much. What did the foreign holders gain? A whole lot.
It almost seems as if in recent years our greatest source of pride in the economy is the sale of Israeli companies to overseas interests. Often it is small, successful hi-tech start-ups that grab the headlines, but not always.
As Tnuva’s case exemplifies, such sales do not necessarily net Israel much benefit, but they do signify loss of control. There is plenty of food for thought even when mega-deals involve small start-ups, but the misgivings are massively amplified when one of our best-known brands and a key food provider passes hands in somewhat disquieting international transactions.
As a society we cannot but be deeply troubled that all this has spun so far out of Israeli control that there is in effect no legal way to prevent Tnuva from being passed on to the highest bidder, regardless of its identity.
This by no means denotes opposition to any sales of Israeli holdings to overseas firms. In our globalized reality that would be impossible. Indeed, if Israel wishes to retain a vibrant and growing economy it should never automatically spurn foreign investment.
That said, we need not automatically exult about all sales either. We need to examine just what we collectively get from foreign deals. This must not necessarily revolve around tax revenue. It should, however, involve at least minimal actual investment in Israel. In the Tnuva case there is too much doubt that the transitory Apax episode was at all worthwhile.
The likely involvement of the Chinese, while totally above board, has raise some concern in Israel. In fact Efraim Halevy, the former director of the Mossad, recently warned MKs that putting Tnuva in Chinese hands could be dangerous.
“For China, Tnuva isn’t just a food company,” he said.
“China does all it can to involve itself in Israeli research and development. The Chinese are highly creative and flexible. If we don’t wake up in time, we’ll discover that they will have taken over not only our food supplies but also our academia. It’s imperative that we organize to defend Israeli assets, which constitute essential components of our national security conception.”
Halevi is no lone voice in the wilderness. The members of the Knesset Economics Committee overwhelmingly oppose the sale to Bright Food and most politicians sounded out on the looming deal are of the same mind.
Israel’s dairy farmers are the most vehement in their opposition, fearing that all their contracts with Tnuva will be renegotiated to their detriment and that Chinese owners would hardly be impressed by Tnuva’s emotive ties to the Kibbutz and Moshav movements, to Zionism’s agricultural endeavor.
All of the naysayers are overlooking the fact that there is little place for sentiment in business. True, the fact that Bright Food is a Chinese state firm adds a dimension to concerns that geopolitical motives may impact on one of this country’s most basic and indispensable industries.
There will likely also be no identification with Israeli interests, which considering Tnuva is one of the most identifiably Israeli companies, is indeed regrettable. But the domino started already falling in 2007, regardless of Chinese involvement.
What looks good on the balance sheets for international companies is not necessarily good for Israel.