Incoming Israel Phoenix Assurance Ltd. (TASE: PHOE1;PHOE5) CEO Eyal Lapidot, in an interview with "Globes" today, referred for the first time to the Excellence Investments Ltd. (TASE: EXCE) deal.
In November, Lapidot was given the responsibility by Delek Group Ltd. (TASE: DLEKG) to negotiate with Excellence co-founders Roni Biram and Gil Deutsch, and he sees a great opportunity for Delek unit Phoenix in the deal, in which it acquires a leading investment house.
The deal reflects a value of NIS 1.5-1.8 billion for Excellence, but Lapidot estimates that Excellence's value is lower. He first notes that one must take into account that 40% of Excellence was bought in 2005 at a value of NIS 775 million, and that the distribution of payments over 4 years has significance too.
"The deal we did today would not have taken place without the initial purchase in 2005, so that from our perspective this is completing a deal. If we take the value in 2005, and average it with the current value, and net out dividend payments, it turns out we are talking about a plausible price of NIS 1.1 billion", he says.
"The deal includes spreading out the payments over four years, so that the present value of the cash flows from the agreement is at least NIS 584 million, and a maximum of NIS 680 million. To that, add the original purchase price of NIS 316 million, and take out of that the rise in equity of Excellence during that period. We are buying 81%, so that we'll get to an acquisition at a company value of between NIS 960 million and NIS 1.08 billion."
Globes: Still, the market value of Excellence is NIS 770 million, when the deal's latest payment reflects a value of at least NIS 1.5 billion. Is this not too expensive?
Lapidot: In my opinion the price of the deal is reasonable, without too many constraints. There is a clear disconnect between the market value of Excellence and its value to Phoenix. You have to include the synergy factor, and the fact that Phoenix will get a strong investments arm."
Published by Globes [online], Israel business news - www.globes-online.com - on June 15, 2009
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