Twice the Check Point Exit: The Barkat Brothers See Meitav’s Valuation and Can’t Believe It
Three decades after the Check Point exit that paved the way for their success, brothers Eli and Nir Barkat, together with their partner Yuval Rekhavi, are on the verge of the biggest realization of their lives. Last week, the investment fund the three co-founded, BRM, hired J.P. Morgan to look for a foreign investor to buy its stake, 24.1%, in the investment house Meitav. What prompted BRM to advance the giant Meitav exit, and what could make it harder to cash in? ● Globes investigation | The new rich: the compensation that turns employees into millionaires ● Bank of Israel reveals: It bought dollars in May and intervened in the foreign exchange market
The basic reason for the move being advanced by Eli Barkat and Yuval Rekhavi, Nir Barkat’s shares, the economy minister, are held in trust, is of course the big money. If BRM succeeds in monetizing its holdings in Meitav at the current market price, it would amount to an enormous exit valued at NIS 3 billion, more than $1 billion, reflecting an exceptional return of hundreds of percent. To understand the scale of the bonanza created for BRM in Meitav, now Israel’s largest investment house, led by Ilan Raviv, it is enough to look at the stock’s jump, almost 2,000% since the merger between Meitav and the investment house Dash-IFAX, in which BRM controlled, was completed at the beginning of 2013. In just the past three years, Meitav’s stock has risen by more than 1,200%, as part of the sharp gains in the stock market led by financial stocks. “The Barkat brothers and Rekhavi look at Meitav’s valuation and can’t believe what they’re seeing,” says a senior capital markets source. “Even in BRM’s wildest dreams, they did not believe the investment house’s value could reach NIS 13 billion, and they want to use the stock surge for an exit.” The same source told Globes that “BRM has been looking for a buyer for its holdings in Meitav for a long time, it has been on the table for quite some time, and it was only reported because the company hired J.P. Morgan.” If the sale goes ahead, BRM’s profit on the Meitav investment is expected to be about NIS 2.5 billion. That is twice the profit BRM booked in the famous Check Point exit, in which it invested a relatively small sum of $400,000 for 50% of the cybersecurity company’s shares when it was founded in 1993. A few years later, after Check Point’s IPO on Wall Street, it realized the investment for $400 million. Later, Eli Barkat founded the technology company BackWeb and believed it would be at least as successful as Check Point, as he told Globes at the time: “We will be bigger than Check Point.” BackWeb went public in 1999, at the height of the tech bubble, and reached a valuation of $1 billion. But the success was short-lived, and the stock collapsed.
The path to the desired exit will not be smooth for the Barkat brothers and Rekhavi, and it is full of regulatory and financial challenges. The prevailing market assessment is that the potential buyer will be a foreign entity, rather than one of the local insurance giants, which are ostensibly natural candidates to buy a stake in the investment house. The main reason lies in regulation: since the Concentration Law, the Capital Market Authority has not approved mergers that would lead a financial body to hold a market share exceeding 15% of the total assets managed in the money management markets. Since Meitav is now Israel’s largest investment house and holds 14% of the provident fund market, managing about NIS 150 billion, a purchase by a large local competitor is not possible. Therefore, “in Meitav’s case, an existing local player will not buy,” one market source is certain. “There will not be a purchase or merger deal in the local market.” He also notes that even if local institutional bodies want to buy shares, they can hold no more than 5%, or obtain the approval of the Capital Market Authority for a larger holding. He therefore estimates that only a foreign investor will be able to step into BRM’s shoes, although “that foreign player will also need the approval of the Capital Market Authority.”
A sale to a foreign entity could also run into difficulties: the strengthening of the shekel over the past year and a half, to below NIS 3 per dollar, makes the purchase more expensive in dollar terms for investors outside Israel. This may make it harder to bridge valuation gaps between the sides. As for the possibility that, in addition to approval from the Capital Market Authority for the sale, approval from the Competition Authority will also be required, the assumption is that this will mainly be necessary if the acquiring entity already has some presence and activity in Israel. Usually, if this is the foreign body’s first acquisition in Israel, it should not reach the Competition Authority. But sometimes the question arises as to the legal definition of that entity, and whether it is indeed foreign. “Investors want an exit”
It should be noted that the person who has already made clear in a conversation with Globes that his family does not intend to sell Meitav shares is Tzvi Stפק, the founder of the investment house, who in recent years transferred his holdings to his children, about 27% of Meitav’s shares, with a current value of NIS 3.4 billion. According to Stפק, “the Stפקs have no intention of selling the shares. Foreign investors discovered the company a few months ago, there was a deal a few months ago in which we were diluted slightly, and since then, naturally, interest in the stock has increased.” According to market sources, Stפק is a “classic long-term investor,” and as such he builds a company and invests in it, which is the family’s “DNA.” In contrast to the Stפק family, the market explains, BRM “are financiers who want to invest in companies and make exits.”
One issue that sometimes hovers over BRM’s activity in public discourse is Economy Minister Nir Barkat’s position in it. However, Barkat has not been involved in managing the fund since 2019, when he was elected to the Knesset. At that time, he transferred his stake into a trust to his brother Eli. BRM is currently seeking to emphasize regarding the Meitav realization it is advancing that, “after many years of investment, support, development and value creation, this is a natural and routine business practice, as is done in all of BRM’s investments. The examination of options has no connection whatsoever to any political or public considerations. Minister Nir Barkat is subject to a conflict-of-interest arrangement, is not involved in BRM’s management and is not informed of or party to such decisions.” BRM also emphasizes that the road to a deal is still long, and explains that “there is no certainty that such an examination will lead to any deal, and a periodic review of investment status and various options regarding it is a natural and proper part of investment management.”
High-tech and medical investments
In addition to the investment in Meitav, BRM’s portfolio includes a series of investments in technology and medical companies. Over the years, the fund has invested in 35 companies. In the past year, it invested in 5 companies. BRM partners: Eli Barkat, Nir Barkat and Yuval Rekhavi (one-third each. Nir’s holdings are in trust) Investments: to date in 35 companies, in fintech, cybersecurity, tech and AI, health care and growth Main holdings Meitav: 24.1% of the shares, worth NIS 3 billion eToro: 8.3% of the shares, worth $250 million OrCam, Prof. Amnon Shashua’s AI company: 5% of the shares Rapid Medical The biggest exit in the past Check Point: profit of $400 million
In addition to the historic exits in Check Point and the navigation app Moovit, the group holds 8.3% of the shares in the trading platform eToro, worth about $250 million, after selling shares in the IPO for $26 million. The group is also invested in OrCam and in Prof. Amnon Shashua’s AAI company. Other notable BRM investments include VIMI, which develops an app for studying mathematics, and Rapid Medical, which is active in brain catheterization.
