William Blair: Apollo, ViaSat likeliest buyers of Gilat

We believe that Gilat is priced attractively for several potential strategic buyers and possibly for a financial buyer.

William Blair & Company reiterates its Outperform recommendation for Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT) on takeover rumors.

William Blair notes The Financial Times report that the company is working with an investment bank to determine potential acquisition interest from private equity and public companies. The investment house also notes that Mivtach Shamir Holdings Ltd. (TASE:MISH) offered to buy Gilat at $10 per share in the first quarter. The investment house added that this was, A price that we believe it deemed too low, but management left open the possibility of being acquired if it found the right opportunity.

William Blair adds, Potential acquirers mentioned in the article include private equity companies Gores Group, Apollo Investments, and publicly traded ViaSat (NYSE:VSAT).

In our view, the two strategic buyers, Apollo/Hughes Communications Inc. (Nasdaq:HUGH), and ViaSat appear to be the more likely candidates based on the complementary nature of Gilats business. Hughes would benefit from an expanded international presence based on Gilats worldwide sales offices and expertise in dealing with niche markets. However, given that Hughes and Gilat are the No. 1 and No. 2 players, we think this could create antitrust concerns. If ViaSat was seeking a method to expand beyond the hardware market into full solutions, Gilat would make sense given their expertise in selling into these markets and important existing relationships. We think that a financial buyer would be intrigued by the $150 million in cash on Gilats balance sheet and other non-operating assets that could be sold.

Although William Blair predicts that Gilats growth rate will slow in 2008, We believe that Gilat is priced attractively for several potential strategic buyers and possibly for a financial buyer. We think private equity companies could also factor in non-operating assets (such as real estate values), which could potentially contribute another multiple point. We believe that Gilats current management team has done an impressive job of turning the company around and returning it to profitability by focusing the company on profitable niche market opportunities.

In a separate development, Gilat announced yesterday that it is deploying a SkyEdge broadband satellite communications network for Russias largest electric utility company, FSK, which serves more than 142.2 million people.

Gilat closed at $11.03 on Nasdaq yesterday, giving a market cap of $430 million.

Published by Globes [online], Israel business news - www.globes.co.il - on October 23, 2007

Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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