Chinese purchase of Israel’s Ahava shows boycott is hurting

Ahava’s factory in Mitzpe Shalem, an Israeli settlement built in the occupied West Bank in violation of international law. (Viktor Karppinen/Flickr)

The owners of boycott-hit Dead Sea cosmetics maker Ahava have announced a deal to sell a majority stake in the Israeli company.

Palestinian rights campaigners are giving the news a cautious welcome as a sign that Ahava’s brand has been damaged by its complicity in the Israeli occupation of Palestinian land.

According to the research and monitoring group Who Profits, Ahava extracts Dead Sea mud from the occupied West Bank, exploiting Palestinian natural resources in violation of international law.

Its factory and visitors center are located in Mitzpe Shalem, a settlement also illegally built in the West Bank. A large percentage of Ahava shares are held by two West Bank settlements.

The name of the buyer was not disclosed, but earlier this week Israeli media reported that the owners had signed an “agreement in principle” to sell to the Chinese investment company Fosun.

The buyer is to take at least a 51 percent stake in Ahava. The deal values the company, which has recently shed a quarter of its workforce, at about $76 million.

Fosun did not respond to an email seeking comment for this article.

“Tainted”

“This signifies that Ahava’s brand was so tainted because of the prolonged international boycott campaign against them that they were unable to find investors in the United States or Europe,” Nancy Kricorian, manager of CODEPINK’s Stolen Beauty boycott campaign, told The Electronic Intifada.

“So they had to turn to China, where the boycott in support of Palestinian rights has not yet gained the same traction it has in other places,” Kricorian added.

In its report on the sale, Financial Times labels Ahava “a business targeted by campaigners calling for a boycott of Israeli settlements” – an indicator of how tarnished its reputation has become.

European Union governments, including the UK and France, have warned their national companies of the legal and reputational risks of doing business in Israeli settlements.

Even the Obama administration recently indicated that the US would not act to prevent boycotts of settlement products.

Despite this, the EU itself has subsidized Ahava’s research in apparent violation of its own policies.

Still, such warnings may deter potential investors.

“Stalled”

In 2012, Ahava hired the investment bank Goldman Sachs to help it improve its international marketing, a sensible step if the goal was to find overseas investors.

But the cosmetics industry publication WWD reported last year that Ahava’s efforts to find a buyer had “stalled” (“Let’s Make a Deal: The Beauty M&A Scene,” 9 May 2014 – requires subscription).

But Kricorian remains cautious. “We are waiting for the details of the final deal to be announced,” she said. “Will Fosun move Ahava’s factory out of the occupied West Bank? Will Fosun buy the entire stake or will two illegal settlements – Mitzpe Shalem and Kalia – remain co-owners of the enterprise? Will Fosun put an end to the company’s pillaging of mud from occupied shores?”

In June, Ahava announced that it is considering moving its factory into present-day Israel, a step Israeli media suggested was related to the boycott campaign and EU proposals to require special labeling on goods from Israeli settlements.

Ahava is currently owned by several Israeli shareholders, including Gaon Holdings. Mitzpe Shalem holds a 35 percent stake.

Shamrock Holdings, the investment arm of the US Disney family, also owns shares.

China-Israel ties

With Israel increasingly worried about the growth of the boycott, divestment and sanctions (BDS) campaign in the West, its government is fostering closer economic, military and political ties with China.

The sale of Ahava to Fosun might be one outcome. The Chinese investment company, which held assets of about $28 billion at the end of 2013, has made two other recent acquisitions in Israel: the insurance company Phoenix Holdings Ltd. and cosmetic laser manufacturer Alma Lasers.

Buying Israeli firms in general, and settlement profiteers in particular, is clearly at odds with Fosun’s policy on corporate social responsibility.

“Fosun cares about the natural environment and has taken an important role in promoting positive and sustainable development of society for years,” the company claims.

But by buying Ahava, Fosun would only be helping to sustain occupation and aiding the violent colonization and illegal exploitation of Palestinian land and resources.

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Comments

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Ahava needs to be maintained as a target of BDS, to destroy the company.

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Was there a competitive bidding process for ahava? If so, I highly doubt that EI or Codepink would have access to any of the information as it would most assuredly be confidential. As much as the boycotters wish to take credit whenever and wherever they can derive it, it is entirely possible not to mention being almost certianly probable that the Chinese bid was the most attractive, and therefore successful. That is of course, if there was a bid-process.

There are additional possibilities as to what may have transpired between ahava and anyone looking to acquire them:
1. Ahava was approached privately in regard to acquisition, and did a deal
2. Ahava approached the Chinese company directly and self-brokered the transaction
3. Ahava was approached by one organization in regard to being acquired, and chose to solicit additional interest prior to closing with any one suitor
4. Ahava, having committed to selling their company and brand, looked for a strong and personalized deal, such as one that would allow their existing staff to remain, saw additional R&D money allocated to specific projects, etc...,

No where does the BDS movement factor in.

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All you've done is to construct a number of unsubstantiated hypotheses- exactly what you accuse BDS advocates of doing when assessing such a development as this. On the other hand, the article includes statements of fact such as this:

"In June, Ahava announced that it is considering moving its factory into present-day Israel, a step Israeli media suggested was related to the boycott campaign and EU proposals to require special labeling on goods from Israeli settlements."

Also mentioned is the fact that the boycotted company has recently shed 25% of its workforce. This may be attributable to factors other than popular pressure against the brand, but it certainly doesn't exclude the effect of that pressure on the company's bottom line.

Your attempt to suggest that the boycott has played no role in the diminished fortunes of Ahiva is disingenuous. Their products have disappeared from shops all across Europe. And frankly, telling supporters of the international movement for Palestinian rights that BDS has no discernible impact contradicts a widely held opinion in Zionist circles. Netanyahu is worried, as is the whole Israeli establishment. They believe in the power of BDS, and they've said so time and again.

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First of all, I think previous commenter missed point that "Israeli media reported" that Chinese company was purchasing huge stake in Ahava. It is good news for BDS movement that Ahava needs outside investors but here is my question:
If they move headquarters to Israel and out of West Bank what becomes of product line because product line is based upon mud from region? Also, why would a Chinese company buy a 51% stake in a company that has lost so much of its valuation?

It is time for Ahava maybe to revamp their whole product line and do away with using stolen land/earth/minerals from Palestine

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"why would a Chinese company buy a 51% stake in a company that has lost so much of its valuation?"

Are you asking why capitalists buy failing companies? Very often they do so in order to loot the targeted entity of its remaining assets. Acquisition is not necessarily a statement of confidence in the company's future.

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They just blew $76 million on a soon to be dead company. How many tax losses do they need? It would have been better wasted buying some old bridges to Brooklyn.

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We are still boycotting Ahava. We are still speaking with retailers who carry Ahava. We are not letting up on our boycott of this product.

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On the basis of minal knowledge of economics and particularly of
economic mergers and sales today, I tend to agree with "Anonymous"
above. Investors (Chinese and others) do not buy other companies
for the fun of it. There is always a reason. Profit? Market share? (And
it goes without saying that there must be benefits for both sides.)

BDS has certainly had an impact. The full and COMPLETE explanations
of any sale or transferrance (including tax implications etc.) are
almost never available to advocacy movements and indeed are
rarely available to those involved.

"Maggie" is correct to urge continued boycott by BDS of Ahava or
of any product of another brand name which may (or may not)
replace "Ahava".

---Peter Loeb, Boston, MA, USA

Ali Abunimah

Ali Abunimah's picture

Co-founder of The Electronic Intifada and author of The Battle for Justice in Palestine, now out from Haymarket Books.

Also wrote One Country: A Bold-Proposal to End the Israeli-Palestinian Impasse. Opinions are mine alone.