A week after Globes revealed that David Fatal had to decide between continuing his term as chairman or as CEO of the hotel company Fatal possessions it turns out that he is expected to vacate the chairman’s seat in favor of Yuval Bronstein, former CEO of the Azrieli Real Estate Group. Bronstein currently serves as a director of the hotel company. Fatal, founder and controlling owner of the company, will remain in the position of CEO.
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Fatal is required to decide on the issue, since since the issuance of Fatal’s strong shares on the stock exchange in early 2018, he holds the position of chairman and CEO at the same time. According to the companies law, it is possible to hold multiple positions for a period of up to five years from the issue. In order to extend this period, it is necessary to obtain the approval of the general meeting by a majority of the minority shareholders – when most of the institutional bodies are usually opposed to the continued doubling of roles. Fatal Holdings did not respond to the news.
Bronstein (53) comes to the position of chairman of the hotel giant with rich business experience, having served for 12 years in various positions at the Ministry of Finance (among others as Deputy Accountant General) and a similar period at the Azrieli Group, where he first served as CFO and later as CEO of the Handel Group “The biggest yielder in Israel, for four years (2013-2017). Since his retirement from Azrieli, he has held various positions in the capital market as a director and chairman of several companies, as well as engaged in real estate initiation.
In dozens of public companies the CEO is also the chairman
The requirement to separate the roles of chairman and CEO in a public company was established in the Companies Law and has undergone several amendments since it was enacted in the early 2000s. The law even expanded and imposed a ban on the chairman’s associates who would serve in a position with similar powers to the CEO, in order to remove any doubt about the strictness of the separation. The spirit of the legislature seeks to completely separate the work of the board of directors from management, so that the board outlines the company’s policy and supervises the CEO’s performance (but does not engage in day-to-day management), while the CEO focuses on managing the company’s business and implementing the outlined policy.
The law initially stipulated that the doubling of jobs would be limited to a period of three years after the issuance, a period that was extended in 2016 to five years. As mentioned, approval for another extension can only be obtained at a general meeting where the decision will be supported by a majority of the shareholders who are not the controlling owner or his associates – that is, mainly the institutional bodies that hold the company’s shares.
An investigation conducted for Globes by the Entropy consulting company, headed by Gal Stahl, shows that as of 2022 there were dozens of public companies in Tel Aviv where the chairman also served as the company’s CEO, and among them foreign companies operating in the American real estate market that issued subsidiary bonds “A, dual companies and even local companies such as Torfaz (Karen Cohen Chazon), Alon Raboa Blue (Moti Ben Moshe), Noor Inc (Moshe Noor), Econergy (Eyal Podhartzer), Barnmiller (Avi Barnmiller) and Kori Sade (Ilan Sheva) ).
The case of Eyal Waldman led to an uproar
One of the biggest storms the capital market has known regarding the issue of doubling the roles of CEO and Chairman, touched Eyal Waldman, the founder of the technology company Mellanox, which was dually traded in Tel Aviv and New York until 2013. In that year, the local institutions voted, according to Entropy’s opinion, against Continued doubling of Waldman’s duties, and he in response led a move to delete the company’s shares from trading in Tel Aviv and leave them for trading only on Wall Street.
The CEO of Entropy Stahl claimed at the time that “the separation between the role of the CEO of the company and the chairman of the board is the most fundamental element in the world of corporate governance… When it comes to a public company with minority shareholders, it is important that the board of directors have real and clean supervision over the management, and this is not possible When the chairman is also the CEO.” By the way, in the end Mellanox appointed a chairman after leaving the stock exchange in Israel, as the same demand also came from the American shareholders.
In other cases that did not involve storms, in 2009 the controlling owner of Scope Metals, which trades in raw materials and metal products – Shmuel Shilo, left the position of CEO in the company and left the position to Gil Hever, while he remained to serve as chairman. As of today, more than 13 years later, the two still serve in both positions. In another, more recent case, in April of last year Tamir Cohen, the right-hand man of the controlling owner of Shikon and Binui Nati Seidoff, decided to give up the chairmanship in favor of Doron Arveli (formerly the director of the Tax Authority) and continue to serve as the company’s CEO.
Fatal Holdings is currently traded at a value of NIS 4.8 billion. The largest hotel chain by market value is traded on the local stock exchange – Isrotel, controlled by the Lewis family. Unlike Fatal, Isrotel is not included in the stock market indices due to the small number of interested parties. The third hotel chain traded in Tel Aviv is Dan Hotels controlled by the Pederman family, whose market value is NIS 2.6 billion.
The local hotel companies are still recovering from the heavy damage caused by the corona epidemic to the world of tourism. The Fatal share, since it began trading on the stock exchange in February 2018, until the eve of the epidemic in February 2020, almost doubled its value. However, the outbreak of the plague, which caused the hotels to be hermetically closed and shook the world of Fatal and the rest of the companies in the field, led to the stock crashing by 84% within a month and a half (in mid-March 2020). Since the depression of the Corona, the Fatal share has recovered and jumped more than 240%.
The chain currently has 253 hotels, some of which are under construction and of which 214 are working. They are spread over 20 countries besides Israel, in Europe, Great Britain and Ireland. The occupancy rate in the chain’s hotels last September was 81%. This is a record level of the years after the outbreak of the epidemic.
During the Corona period, Fatal Holdings made a series of emergency moves to increase its liquidity, including streamlining hotels, issuing capital and debt, receiving grants, selling assets, as well as obtaining concessions or deferrals in the rent it pays for some of its hotels.
In the first nine months of 2022, the chain’s revenues amounted to NIS 4 billion, an improvement compared to about NIS 2 billion in the corresponding period in 2021. The profit before depreciation, taxes and amortization jumped to NIS 1.2 billion, an increase of 48% compared to the corresponding period.
In the bottom line, Fatal Holdings recorded a loss of 69 million shekels, a reduction compared to a loss of 207 million shekels in the first nine months of 2021. The operating profit (FFO) jumped sharply to 340 million shekels, compared to 67 million shekels in the corresponding period.