Defense electronics company Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) has acquired the assets of military training simulator company BVR Systems (1998) Ltd. (Bulletin Board:BVRSF.OB) for $34 million, subject to accounting adjustments.
The price paid reflects a 45% premium over BVR's market cap, based on Friday's closing share price of $0.20, of $23.39 million. The $0.29 per share paid has not been reached by BVR since March, 2005.
The deal is for BVR's assets, so that its owners will essentially be left with a shell company that holds the cash paid in the deal. BVR chairman Aviv Tzidon, together with Portal Marketing, holds 49.7% of BVR, making him the largest shareholder in the company.
Tzidon, with his partners, will be able to decide what to do with the funds received. The options include using the BVR shell to invest in new ventures, or to pay out the money as a dividend. If the money is paid as a dividend, Tzidon and his partners will get $16.9 million.
The final amount paid in the deal can still change, based on specific projects, and the price can fall as much as $1.5 million.
Elbit Systems president and CEO Joseph Ackerman told "Globes" that all of BVR's employees and management will stay in their positions. Ackerman said, "We welcome BVR's employees to the Elbit Systems family. The acquisition of BVR System's business activities is in line with our long-term strategy of growth through mergers and acquisitions of complementary companies with high synergistic value."
BVR develops and produces training, simulation and debriefing systems for air, sea and ground forces.
Globes: "Is BVR's profitability higher or lower than Elbit's?"
Ackerman: "Lower, and they also realized that to succeed in the world you need to join a larger enterprise. We'll have to work to raise profitability through the merger with Elbit."
Ackerman also said that BVR's capabilities complement Elbit Systems' other training capabilities.
Elbit Systems' shares closed at $64.69 on Friday, giving a market cap of $2.72 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on July 20, 2009
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