Two months after reporting negotiations for the sale of communications equipment company Teledata Networks Ltd., Elron Electronic Industries Ltd. (Pink Sheets: ELRNF; TASE: ELRN), and Kardan Israel Ltd. (TASE:KRIS) have sold it to Canada's Enablence Technologies Inc. (TSX: ENA) for $50 million. Enablence will pay $10 million in cash, $10 million in secured interest-bearing promissory notes payable in two years from the closing, and $30 million in shares.
Elron will report a capital gain of $23 million on the sale and Kardan Israel will report a capital gain of NIS 44 million.
This is the fourth exit in Teledata's history, which includes an IPO in the 1990s, a takeover by Poalim Investments, acquisition by ADC Telecommunications Inc. (Nasdaq: ADCT) in 1999, and repurchase by Teledata's management and Kardan Israel in 2004.
Teledata develops next-generation network (NGN) upgrade products and solutions. The company has not had impressive results in the past two years, and it faces competition from major telecommunications equipment manufacturers, including Alcatel-Lucent (NYSE; Euronext: ALU), and China's ZTE Corp. (HKSE: 0763; Shenchen: 0063), and Huawei Technologies Co. Ltd.
Teledata's history includes a number of financial measures in recent years, which is apparently the reason for the odd breakdown of capital gains from its sale. In its notice to the TASE, Elron said that it would receive a total of $24 million from the sale, nearly half the total amount, even though it owns only 21% of the company. Kardan Israel will get $13 million, even though it owns 37.5%. Most of the difference is because Elron will receive $17 million in Enablence shares, four times more than Kardan Israel. On the other hand, Elron will receivet only $3 million in cash.
Teledata's other shareholders are Israel Infinity Venture Capital and its Chinese affiliate CSVC-Infinity.
Enablence is a supplier of fiber-to-the-premise (FTTP) equipment for triple-play residential and business services and optical components and subsystems for access, metro and long-haul markets. The company has a market cap of $186 million, and had $12 million in sales in its last fiscal year.
Elron apparently hopes that the sale of Teledata will boost Enablance's market cap, since the shares Elron will receive are vested for 12-18 months after the closing.
Elron is the high-tech investment arm of Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH). Kardan Israel is a subsidiary of Kardan NV (TASE: KRNV;AEX:KARD). Elron's share closed at $8.05 in New York yesterday, but rose 0.1% on the TASE today to NIS 29.93. Kardan Israel's share fell 2.5% to NIS 7.63.
Published by Globes [online], Israel business news - www.globes-online.com - on April 15, 2010
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