The bombshell that Gad Zeevi dropped this week in Geo Interactive’s lap shook that company's management to the core.

In this latest affair, Zeevi is demanding 50.1% of Geo, through Malam Systems, in return for the NIS 1.6 million refund by Malam under an “agreement of disinvestment” the two parties signed in 1995.

According to Geo’s version of events, in 1994, the parties negotiated a Malam investment in promising technology company Geo, in which Malam gave Geo a loan. Geo claims that it reimbursed Malam for the loan under the agreement of disinvestment, signed after differences of opinion emerged over which development direction Geo should take.

50.1% of Geo shares, traded on London’s AIM stock exchange, are worth almost $1 billion even after the blows taken recently by the company. It's easy to understand Zeevi’s desire to lay his hands on such a packet (Malam itself is traded at only $50 million company value).

At the same time, the vague circumstances under which the matter is being revived - an alleged misrepresentation by Geo in the agreement of disinvestment, (which Malam learned about only recently) - is not a sufficiently convincing argument in support of Zeevi’s demand. Evidence of this is seen in the crash of the Malam share (almost 20% in the past two days).

Add to this the fact that Malam was still part of the Clal Trading Division (sold to Zeevi at the beginning of 1998) when it signed the agreement of disinvestment, and you may understand Geo chairman’ Naftali Shani’s reaction, in which he said, “It’s groundless and absolutely pathetic. It’s sad to see the ethics Gad Zeevi is bringing to the Israeli business world. We’ll do everything to show we do not cave in to extortion and gangsterism. If Zeevi thinks we’ll pay him to avoid trouble, he’ll find he was mistaken.”

We would not advise Geo to treat the affair as a “boy who cried wolf” story (Wolf is the English translation of the Hebrew name Zeev – S.S.). First of all, Zeevi has hired the services of a leading attorney to represent him in the dispute, and secondly, Zeevi’s record in local and even overseas business shows that he does not always come away from these struggles empty-handed.

Zeevi, born in Kibbutz Massada and currently living in Haifa, entered business in the mid 1960s, initially in the infrastructure sector. Following the Six Days War, he built major projects in the Sinai desert, mostly constructing roads and military bases. In the 1970s, he expanded into Africa and South America. He based himself in Nairobi, where he became an extremely powerful businessman, under the protection of Kenya’s president Daniel Arap Moi, who apparently became his business partner.

In the 1990’s Zeevi re-established himself in the elite of the local business community. In recent years, he has consistently accumulated assets in real estate, technology, retail trade and communications, usually buoyed by bank credit, which reached a peak when he acquired a 20% share package in Bezeq last year.

1993: Zeevi compromises in Paz

Zeevi chalked up some resounding failures in the 1990s. The first was when the Securities Authority torpedoed his attempt to issue a Puerto Rican oil refinery that he owned on the Tel Aviv Stock Exchange. This was followed by the Bank of Israel canceling his winning bid in the tender for control of the United Mizrahi Bank, even though his bid was significantly higher than the others.

Zeevi’s most famous failure at the time was his attempt to take control of energy company Paz. Zeevi held a quarter of the company’s shares in the 1980s and at the end of the decade he bid for the remaining shares, held by the State. He lost to Australian investor Jack Lieberman and petitioned the courts, but was rejected. He later sold the minority shares he held in Paz to Bank Hapoalim.

A short time later, “the Polish group” – Bogoslav Bagshik and Andrei Gonshiurovsky – acquired 50% of the Paz shares from Jack Lieberman. Based on press reports that the group was expected to be sued for fraud in Poland, its members looked for a buyer for their shares and found Zeevi, much to Lieberman’s chagrin.

However, the shares never reached Zeevi, since the Polish group claimed he did not meet the agreed upon financial commitments. Legal arbitration proceedings were started amid mutual recriminations, and a compromise was concluded in January 1994, in which the Paz shares were returned to the Lieberman family, while Zeevi was reimbursed for $5 million out the $7 million he had paid as a deposit to the Polish group.

1998: Zeevi prices HyperShuk

In 1998, Zeevi’s businesses started to soar in Israel. At the beginning of the year, he placed his hands on the Clal concern’s holding company, Clal Trading, investing $550 million. The acquisition gives him a holding in a number of key companies in Israel, including Clal Systems, the Ace – Buy and Build chain, the commercial television channel franchisee Keshet, [chemicals concern] Gadot and others.

Zeevi also wanted to get his hands on 50% of the HyperShuk retail chain for NIS 103 million, under an option given to Clal Trading by Clal and Tnuva. However, a surprise awaited him. The other shareholder of HyperShuk, Co-op Zafon, announced it was exercising its right to refuse acquisition at the denominated price. Zeevi made another attempt, raising his offer to NIS 120 million. Co-op Zafon claimed he had no rights enabling him to do this, but ultimately gave in.

1999: Zeevi gets involved in Japanauto dispute

In November 1997 Zeevi acquired 50% of the shares in Subaru’s Israeli representatives Japanauto car agency for $20 million, through listed company Mirage. Two years later, the partner, Daniel Barnovsky, claimed, “We were warned that he is a cold, ruthless businessman and we very quickly found that the warnings were accurate. Zeevi is domineering and it is very difficult to work with him. Somebody once told me said that whenever you make a deal with him, you should appoint an arbitrator first.”

Following one harmonious year, bitter differences of opinion erupted between the partners. The Barnovsky family turned to the courts to dismantle the partnership, claiming a series of incidents in which Zeevi caused damage to the company, to promote the interests of his privately owned companies. At the same time, the family offered a BMBY (Buy me-Buy you) deal with Zeevi, to buy its share of Japanauto for $65 million.

Mirage refused the offer and submitted a counter offer. Eventually, Subaru manufacturer Fuji of Japan decided the family should sell its shares. Mirage acquired full ownership of Japanauto for $30 million.

May 2000: Zeevi embroiled in Bulgaria

In addition to Zeevi’s large business in Israel, he has businesses in overseas real estate and energy. A large deal in which his name was recently involved was the acquisition of Bulgaria’s national airline Balkan Air last year. Press reports in May 2000 show that here too, he got involved in a dispute over the deal.

September 2000: Zeevi's designs on Bezeq

The jewel in the crown of Zeevi’s recent business is the acquisition of 20% of communication giant Bezeq’s shares from British company Cable & Wireless in October 1999. Zeevi invested $630 million in the shares, at NIS 17.5 per share, financed by a banking consortium.

Two months ago, Zeevi decided the time was ripe to improve the financing terms. He turned to the capital market to raise $250 million in bonds to institutional concerns, leading to a 40% rise in the Bezeq share price, compared to the acquisition price. The capital raising round is aimed at repaying part of the bank credit given to the Zeevi group, in order to release resources for additional investments, and primarily for the planned takeover bid in Bezeq.

Following reports of the planned move, the banks “were pressured” into agreeing to increase the credit accorded Zeevi by $80 million. The private placement was then canceled, causing some embarrassment to institutional bodies that agreed to participate.

Incidentally, the Bezeq share price, which yielded a huge theoretical profit last month, has since shrunk by more than 20% and is currently close to Zeevi’s acquisition price.