Malam Team Ltd. (TASE: MLTM) yesterday signed an memorandum of understanding (MOU) to acquire three subsidiaries of Netcom Group: Netcom GS Ltd., Netcom Inc., and Netcom Global Systems Inc. for NIS 68 million. Malam-Team stated that it paid $11 million, two-thirds in cash and one-third in shares, plus a $2.5 million guarantee to ensure its indemnification rights.
The deal closes a circle for Isfar Home-Tech president Eilon (Lonny) Herzikovich, who bought Netcom eight years ago. Netcom is one of Israel's oldest communications services companies, and has undergone many reincarnations. Founded in 1990, the company had eight subsidiaries at its peak and operated both domestically and in foreign markets. The company was involved in grandiose projects in Europe and tried to buy a stake in an Israeli television station.
Isfar acquired half of Netcom from Aurec for $15 million in 2000, and later boosted its stake to more than 90%. Isfar paid top dollar, since this was a time when companies were in a rush to buy communications equipment and companies values were at a peak.
Herzikovich could have made an impressive exit at the time. Netcom executives told the media at the time that it would invest $150 million over the next three years in Israeli telecommunications. Today's sale was made at a fraction of the value because Netcom has had to repay large bank debts and has a low, if any, operating profit.
Netcom's core business is the supply of communications solutions and services. One of the company's project is the IDF Eitan River project, considered the most prestigious project in Israel's communications industry. The company informed Malam-Team that the activities purchased had NIS 180 million revenue in 2007.
The merger with Malam-Team will add to the group activities that it currently does not have and will turn it into one of Israel's leading communications services companies. Malam-Team said it has similar activities to those acquired, amounting to NIS 40 million in sales in 2007.
Published by Globes [online], Israel business news - www.globes-online.com - on January 17, 2008
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