Later, when his efforts began to bear fruit, he informed Moshe Shamir of the deal that was crystallizing behind the scenes, enabling him to reach out to Fuechtwanger. At the same time, he set up a negotiating team consisting of himself, Melamed, Brown, Shamir, two representatives of Zori (Dr. Joshua Kohlberg and Dr. Lieblich), and, of course, Nachman Salomon, the CEO of Assia, who had already been convinced of the deal’s merit by Eli and his young associates from the CTIC.
At each stage of the negotiations, Eli updated his negotiating team and went through the process of winning their backing. At some points, such as the complicated situation in which he maintained that Assia should raise the proposed share price submitted in the Industrial Development Bank tender, he encountered challenging disagreements with members of the team, particularly Shamir.
During Assia’s negotiations with Zori, Shamir had been a dominant figure with an opinion that could not be disregarded. Then, however, Assia’s three owners were still making key decisions alone, whereas now Eli’s standing in the company was much stronger. Nonetheless, he recognized that Shamir, the representative of the Elstein family, was a central figure who still required convincing and therefore included him in the committee responsible for authorizing the phases of the takeover. Later, he succeeded in convincing him and the rest of the negotiations committee of the details of the transactions. Years later, Eli described this challenge as “perhaps even more complicated than convincing the people at Teva.”
•••
Once the heads of Assia signed off on the deal, the takeover of Teva moved into its final stage: convincing a bank to finance it. Eli initially believed he would have plenty of time to do this. Moreover, during the negotiations, he reached an agreement with Sanbar, who had great respect for Assia in general and Eli in particular, that the Industrial Development Bank would loan Assia the funds necessary to purchase the shares. However, the day after he won the tender, he received a phone call from Sanbar, who asked him to come to his office for an urgent meeting.
“I am under immense pressure from Moshe Baram and Clalit Health Services. Even [minister of trade and industry] Ze’ev Sherf, who permitted the tender, is now hesitating,” Sanbar explained.
“Other bodies are also demanding that I annul the tender and refrain from implementing it,” he told Eli. “If you want to finalize it, bring me a bank guarantee today, and we’ll finalize it.”
Sanbar needed the guarantee to prove that the stocks had already been sold. The amount in question was one million Israeli pounds.
“I don’t have a penny to my name,” Eli told him somewhat alarmed.
Sanbar did not let up: “As you wish, Eli. If we complete the transaction today, it’s sealed. If we finalize it tomorrow, it’s also sealed. But if we wait until the day after tomorrow, there’s going to be trouble.”
The situation had already become problematic for Sanbar, as his board of directors had still not officially authorized the deal. The only person actively working with him on the board was attorney Yaakov Salomon, who was also a member of Assia’s board of directors and who, when he heard of the difficulties he was facing, told Eli in no uncertain terms that the only way to solve the problem was to obtain a bank guarantee.
When Eli and Sanbar finished their meeting at about 10:30 a.m., Eli was convinced that the deal would fall apart if he did not obtain a bank guarantee immediately. He knew that Bank Leumi, the bank that worked with Assia, would not issue the guarantee, both for procedural reasons (it had not received an official decision from Teva’s board of directors requesting the guarantee and expressing a willingness to have Assia guarantee it) and because the bank was naturally conservative and cautious so was not pleased with the idea of providing a guarantee involving even the slightest risk. The risk in question stemmed from the difference between the price of Teva’s shares on the stock exchange and the price Eli offered for the shares held by the Industrial Development Bank.
At the time, the Industrial Development Bank’s offices were located in the Shalom Tower in Tel Aviv, just two stories above the offices of the Export Bank. The Export Bank’s CEO, Zalman Shoval, was an old acquaintance of Eli’s. Shoval, who would later become a prominent Israeli politician, was then a young, up-and-coming banker. At that time, he was supervising the operation of a small bank that had once provided services to Assia with which Eli had been extremely satisfied. Lacking a better alternative, Eli decided to go down to Shoval’s office and try his luck there.
“Zalman,” he began, “I have a one of a kind story to tell you. If you join me, I’ll build a small business and you’ll be able to claim a great deal of credit. If you don’t, we’ll try elsewhere.”
Shoval asked for details and Eli explained why he urgently needed a bank guarantee.
“How can I give you money without the approval of the board of directors of Assia?” Shoval pondered aloud.
Eli did not give up.
“I can bring you the authorization of the chairman of the board of directors and attorney Yaakov Salomon will corroborate everything I tell you,” Eli promised. “Ami Brown [of the CTIC] can also give you a call if you like.”
“Give me an hour, Eli,” Shoval finally said, “and don’t go to anyone else for now.”
“You’ve got an hour,” Eli responded.
When Shoval returned, he was carrying a small sheet of paper bearing the three principles on which the loan would be based: transfer to the Export Bank of the Teva shares to be purchased from the Industrial Development Bank; a commitment to complete the rest of the bureaucratic requirements within a short period of time; and Eli’s personal guarantee.
Shoval knew that the personal guarantee of Eli Hurvitz of Assia was worth almost nothing at the time. After all, all he had to his name was a two-room apartment worth no more than a few thousand Israeli pounds. The fact that Eli had signed a guarantee in the name of Assia based only on the verbal authorization of the chairman of the board and without the approval of its board of directors was also highly unusual. Nonetheless, Shoval returned one hour later with a positive answer.
Shoval’s calculations were simple. The difference between the guarantee and the market value of the shares was approximately 40 percent, which was a sizable risk. However, he believed in Assia and believed in Eli and knew that his bank could make a significant profit from the deal.
Eli dashed back up to Sanbar’s office at the Industrial Development Bank and presented him with a letter from Shoval which read as follows: “We will draw up a bank guarantee for IDB as soon as the Teva shares you hold are transferred to us.” Years later, Eli recalled how pleased Sanbar was by his success in acquiring the guarantee. Sanbar had been in favor of the deal and had promoted it; the agreement Eli received from the Export Bank clinched it and paved the way for its implementation. It was a bank guarantee with an “extremely good return,” as Eli would subsequently come to describe it. Later, Assia received another loan from IDB which, after receiving the approval of its board of directors, it used in conjunction with capital it already had at its disposal to purchase the shares of Teva held by Feuchtwanger and Friedlander. With this, Assia concluded its takeover of Teva.
•••
The takeover also raised another issue of considerable importance: how to deal with Teva’s employees. The efficiency measures that Eli regarded as a central component of the immediate and future success of the company would require reducing Teva’s workforce immediately. The workers understood this but were unaware of Eli’s plans to build a new plant in Jerusalem. They assumed that he would proceed as he had with Zori and dismantle the plant in Bayit Vegan and transfer its production lines to Ashkelon or the new port city of Ashdod. According to rumors circulating throughout the Histadrut, Assia had received land from the government to either build another plant to develop the new port city or to establish a chemical fermentation plant near Ashkelon. This, they believed, would require the dismant
ling of the plant in Bayit Vegan and the dismissal of 220 employees. Influenced by the rumors, upon learning that Assia had completed its takeover of Teva and that Eli was planning to visit the plant in Jerusalem, the workers immediately went on strike again, with the full support of the Histadrut. Some employees went to Tel Aviv to demonstrate against the new owners.
The demonstration protesting the deal between Eli and Sanbar was held outside the offices of the Industrial Development Bank on the day that Assia acquired the shares, which was also the day that Eli was planning to visit the offices to conclude the deal. Eli was aware of the workers’ plans and knew he could expect a hostile and possibly even aggressive welcome, yet decided to show up anyway. When he entered the bank, Sanbar told him that the demonstrators had asked his permission to enter the halls of the bank’s offices and that he had agreed. Eli was ready for the challenge. He intended on speaking with their leaders despite the problematic physical conditions. He decided to go out to meet them. Sanbar was concerned and asked Eli to refrain from doing so.
“Sanbar,” I told him, “tomorrow they will be working for me. I’m walking out the front door.” Sanbar was worried I would be harmed physically. I went out to meet with them and some of them did not know who I was. They wanted to negotiate with me and submitted their demands in writing. I told them that I did not hear well that way…. Later, I told them in no uncertain terms: “I am a Jerusalemite. I was born in Jerusalem. Do you think I am going to destroy Jerusalem?” One of them asked me a few questions that were particularly impudent and I replied: “Don’t tell me your name. I don’t want to remember it. Remember one thing: you will never be my boss, but it is 100% certain that I will be your boss, so behave accordingly.” They looked as if they were going to faint when I said that. Then, I told them that they were welcome to ask questions if they wished to do so. They asked: “Do you promise to build the plant on Mount Tamir?” I told them: “Look, I don’t know where Mount Tamir is. We will build a plant in Jerusalem that bears no resemblance to the one you planned. The plant we are planning will last for years. It will fulfill not only the needs of today, but also our needs in the future. It will be an important plant in Jerusalem and will focus primarily on export.” Then they asked: “Are you willing to promise that none of us will be fired?” I said: “No, I will not promise that. But I can promise something else. You know your people better than I do. I am willing to recognize your committee and allow it to instruct me on how to fire the people who need to be fired and I will fire them. Some are willing to leave, others don’t want to, and others are on their way out. We will pay higher severance pay and from the perspective of social welfare, we promise to try to take into consideration all that you ask…. At Assia, we take care of our employees to the best of our ability.” They continued to ask many more questions of this kind, and I tried to answer them.
This somewhat odd spectacle played out at the entrance to the bank, with a crowd of dozens of Teva employees leaning over the new owner of their plant to learn what the future held in store for them. In conclusion, and in his simple, straightforward manner, Eli told them:
“If you want the plant to go on strike – go on strike. We’ll live with it. In the end, we’ll get the company.” A female employee asked: “Will you open a preschool?” I answered: “You don’t have a preschool today, so why are you asking me for one? You can ask me if I would be willing to consider [the needs of] the employees and open a preschool. We’ll look into the matter and we’ll open a preschool if possible. If it is the right thing for us to do, we’ll open one. It depends on how many hours you work.”
The tensions eased. The employees of Teva understood that Eli was not interested in firing workers at any cost and that he sought to forge a positive relationship with their elected leaders and to try to resolve the overall disagreement. At the same time, he made it abundantly clear that the plant was now under new ownership which sought to increase efficiency by all means necessary, including firing employees if required, which it most likely was. He described Teva as a plant that was “excellent” from a pharmaceutical perspective, but that was a failure, “to put it mildly,” when it came to management. For this reason, he believed that changes were in order. At the end of the day, the two sides signed an agreement in which Assia declared its intention to continue operating the Teva plant in Jerusalem, to step up its development, and to meet reasonable demands from the workers. The workers, for their part, committed to go back to work full time.
At this stage, Eli’s clearly articulated intentions calmed most of the workers. However, the Jerusalem branch of the Manufacturers Association of Israel tried to carry on the struggle that the Histadrut had started. For the first time in the organization’s history, the owners of factories in the Jerusalem area declared a two-hour strike at their factories to protest the “Tel-Avivian” company and “as a sign of solidarity with the Teva plant’s struggle for independence.” The strike stemmed from the Jerusalem manufacturers’ concern that Eli and Assia were planning to close the plant in Bayit Vegan and move it to Ashdod or Ashkelon. Eli’s assurances that he had no intentions of doing so fell on deaf ears.
•••
Although its significance was not absolutely clear at the moment, the protest at Teva marked the beginning of a new chapter in Eli’s life. Immediately following the takeover, he was appointed CEO of Teva Jerusalem, as it was referred to from then on (and into which Assia-Zori was later integrated). He continued directing this company for the next 40 years, transforming it into the largest and most successful company Israel has ever known, one of the largest pharmaceutical companies in the world, and a world leader in generic pharmaceutical production. The manner in which Teva was acquired and the merger between Assia and Zori were indications of the future. They reflected wisdom, vision, strategy, creativity, understanding of human nature, astuteness, and a powerful and inexorable will to achieve ambitious goals – all of which would emerge as prominent attributes of Eli Hurvitz in the years to come.
Eli and his sister Ruth, 1934
Eli with his parents, Zippora and Zvi, and his sister Ruth, 1936
Eli (standing third left) with his friends from the Scouts Movement
Founding ceremony of Kibbutz Tel Katzir, November 1949
Eli and Dalia, 1955
Eli and Dalia on their wedding day, Tel Katzir, June 21, 1953
Eli held high. Dalia on the left, her friend Varda Ben-Eli, on the right. Tel Katzir, 1953
Purim 1960. Eli in the center. Dalia bottom right. Ruth and Mishael Cheshin second row on the left. Kobi and Carmela Even Ezra second row right. Standing from left: Sonny and Arik Maklef, Zvika and Tmima Levanon, Dina and Moshe Zwickel (behind sign)
Dalia and Eli, 1955
Dalia and Eli, 1955
Eli, 1955
Eli and Dalia with their daughter Vered, 1955
Eli and Dalia in Istanbul on Eli's first business trip abroad, 1961
Dalia and Eli on their wedding day. Dalia's parents on the right, Eli's parents on the left, June 21, 1953
Hanukkah 1953. Standing from left: Eli, Keren Salomon, Yaakov Salomon, Ruth (Cheshin) Salomon, Naomi Salomon, Avraham Salomon, Nachman Salomon. Sitting from left: Gili Salomon, Sarah Salomon, Dalia Hurvitz, Hana and Haim Salomon, Malka Salomon
Workers at the Assia Pharmaceutical Company
Part II
Achieving Glory
Chapter 9
The Road to CEO
Eli was appointed the CEO of Teva Jerusalem because the heads of Assia were certain that it would become profitable under his management. However, the corporate management in Petah Tikva was not willing to lose Eli altogether and asked him to work out of its offices for half the week as the company’s deputy CEO. He also remained a member of the board of directors. The members of the board also decided that at this stage, Teva would remain an independent publically traded company and would only be merged with Assia-Z
ori later.
As a publically traded company, Teva Jerusalem was required to issue semiannual public reports and to operate with full transparency. Eli’s knowledge of economics made him the obvious person to handle this. He recognized the urgent need to replace Teva’s accounting department with a group that could both operate in accordance with the standards set by the securities exchange and maximize the plant’s efficiency. The new department had to be separate from Assia, in order to avoid conflicts of interest, since the two entities were legally independent of one another.
Increasing efficiency at Teva was no simple matter. Its domestic sales and number of products exceeded those of Assia and Zori combined. The export potential of the drugs and other products Teva produced were practically infinite.
Eli now focused on the newly acquired company’s rehabilitation and rapid development. A small number of employees resigned of their own volition. Most workers who left received increased severance pay. Within a relatively short time, the remaining employees were expected to significantly increase their output in light of Eli’s aim of increasing Teva’s exports. Eli set about motivating employees to increase production, which proved to be a formidable undertaking that constantly forced him to find creative solutions, including awarding bonuses and other incentives.
At first, Eli’s efforts did not calm the Teva employees, who displayed hostility toward virtually all his requests, and certainly did not win them over. The employees also attempted to thwart the success of pharmacist Gadi Horn, Eli’s personal representative in the plant, whom the workers referred to as “Eli’s spy.” Eli was not dissuaded. He understood that the workers did not trust him and constantly suspected him of working to dismantle the company to integrate it into Assia, as he had done with Zori.
Eli Hurvitz and the creation of Teva Pharmaceuticals: An Israeli Biography Page 15
