Markstone Capital Partners Group LLC, run by managing directors Ron Lubash and Amir Kess, will "not make investments in new portfolio companies going forward", according to its letter to investors, a copy of which was obtained by "Globes".
Markstone raised $800 million in 2003-04 from US institutional investors, including California Public Employees' Retirement System (CalPERS), as well as Israel's Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), Menorah Mivtachim Holdings Ltd. (TASE: MORA), and other institutions. Markstone has invested $570 million to date, which means that it will not invest the remaining $230 million, 30% of the amount raised.
Markstone added that it not propose additional management changes at this time, and that Dan Gillerman will continue to serve as chairman in an active capacity. He has joined the boards of bookseller Steimatzky Ltd and Magnolia Silver Jewelry Ltd. Gillerman replaced Markstone founder Elliot Broidy, who resigned after admitting to bribing state officials in New York.
Markstone said that it will hold its annual investor meeting in New York on October 5.
Markstone's original investment period was set at six years after the initial investment. This time frame will expire in September, and the fund's managers are not seeking an extension. This means that the fund will be based only on the investments made to date and its ability to sell them at a profit.
Markstone disclosed that its investments totaled $572.9 million as of June 30, and that the aggregate value of its portfolio companies was $685.9 million. Investments include Dapei Zahav Ltd. and seed developer Zeraim Gedera Ltd., which were sold at handsome profits.
Markstone made an upward valuation of some of the remaining portfolio companies compared with their value at acquisition, while it sharply reduced the value of other companies. The fund showed a negligible return on investment of 1% for the first half of 2010
Markstone's most successful investment was in irrigation equipment manufacturer Netafim Ltd. Markstone revalued the company upward by 12.8% to $100.3 million, compared with its valuation of $88.9 million at the end of 2009. The return on investment since the investment Netafim four years ago is 129%.
Markstone said, "Netafim had a strong quarter, outperforming targets and tapping returned demand for irrigation and water solutions around the world." It added that Netafim's sales growth was more than 15% higher in the first half compared with the first half of 2009.
Markstone reported that Magnolia Silver Jewelry's first half sales in Israel were nearly 8% more than in the corresponding half, and Markstone valued the company at $115.4 million, 8.4% more than at the beginning of the year and 156% higher than the valuation at investment of $45.1 million in 2007.
Markstone's worst investment was in Elran (DD) Real Estate Ltd. (TASE:ELRE), controlled by Gadi and Dori Dankner. Markstone has written off 90% of its investment in the financially troubled company and estimates its value at just $2.5 million.
Markstone's other portfolio companies are nylons manufacturer Nilit Ltd., all terrain vehicle (ATV) manufacturer Tomcar Ltd., assets management company AMFIC Ltd., and soil stabilization solutions PRS (Mediterranean) Ltd.
Published by Globes [online], Israel business news - www.globes-online.com - on August 18, 2010
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