Internet Gold (Nasdaq: IGLD; TASE:IGLD) has announced an agreement to acquire 60% of the control and equity in 012 Golden Lines Ltd. according to a company valuation of $140 million. Internet Gold will pay Golden Lines controlling shareholder Eliezer Fishman $84 million for the 60% stake. Fishman will be left with 37% of Golden Lines.
Internet Gold's announcement said that the detailed agreement would be signed by the parties within the coming days, and would be subject to the approval of the boards of directors and the relevant regulatory authorities.
Under the agreement, following the acquisition, the companies will act to merge Golden Lines with Smile.Communications, which is a wholly owned subsidiary of Internet Gold that provides internet and international communications services.
Internet Gold has been active in the Israeli internet market since 1996. The company is controlled by the Eurocom Communications Group which is owned by the Elovitch family. Internet Gold operates under the brand Smile. At the beginning of this year, the company reorganized its operations and separated its activities into two wholly owned specialized subsidiaries: Smile.Communications, which provides internet and international communications, and Smile.Media which specializes in internet media and advertising, e-Commerce and paid content services.
The new merged company will have estimated revenue of NIS 1 billion and an estimated 33% share of the internet and international communications markets in Israel. The newly merged company will also strive to continue its penetration into the fixed line domestic VoB telephony market.
Following the completion of the merger, Eli Holtzman, CEO of Internet Gold, will continue to manage the parent company and also the subsidiary Smile.Media. The newly merged company of 012 Golden Lines and Smile.Communications will be managed by Stella Hendler, CEO of Golden Lines. "I am excited about with this acquisition and merger and believe it is a wise and correct move," said Holtzman. "I have no doubt that this merger between our companies will create a new market force which will assist us in further strengthening our position in the communications market."
At the beginning of 2006, Fishman Holdings launched proceedings for a planned offering of Golden Lines to institutional investors on London’s Alternative Investment Market (AIM). The offering was eventually postponed indefinitely after foreign investors were not interested in investing in Golden Lines at the value sought by its shareholders, who aimed for $130-150 million. Foreign investors wanted to invest at a lower value, since the company did not yet have a permanent license for the provision of internal telephony services to private customers using VoB technology.
According to the prospectus filed with AIM, Golden Lines posted revenue of NIS 639 million in 2005, and earnings before interest, taxation, depreciation and amortization (EBITDA) of NIS 130 million.
Golden Lines has 630,000 registered customers for all services, and 190,000 broadband Internet subscribers. The company said it had an estimated 30% share of the international telephony market in the first quarter of 2006, and a 16% share of the broadband Internet market.
Eliezer Fishman is the controlling shareholder in "Globes".
Published by Globes [online], Israel business news - www.globes.co.il - on July 2, 2006
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