Direct demands by shareholders to oust the management of a company are very unusual among Israeli companies, but that it exactly the demand received at Magal Security Systems Ltd. (Nasdaq: MAGS; TASE: MAGS) today. The company's president and CEO is Eitan Livneh, and its chairman is Jacob Perry.
The trigger for the demand is the upcoming general shareholders meeting on June 23, which will vote on the directors. Magal's US shareholders notified management that they want to convene a special general meeting to oust Livneh and Perry, and directors Jacob Even-Ezra, the former controlling shareholder who still owns a minority stake, Jacob Nuss, and Barry Stiefel.
The US shareholders want to replace them with five new directors, some of whom will also serve in senior management positions.
The US shareholders also want to postpone the June 23 general shareholders meeting, which was also due to vote on improving Perry's contract, despite Magal's difficulties. The US shareholders want to reschedule the meeting to a later date, and use the time to present a plan to rehabilitate the company.
Magal now faces two choices: either hold the annual general shareholders meeting as scheduled, and hold a special meeting afterwards; or accept the demand of the US shareholders and postpone the general shareholders meeting, which will also discuss replacing company directors. If Magal's management opts for the first choice, by law it has 21 days to notify shareholders about a special shareholders meeting to be held within 35 days, which means that the special meeting will be held no earlier than 56 days hence.
Magal's largest shareholder Nathan Kirsh, with a 24.2% stake, held directly and indirectly through Mira Mag Ltd., which he controls, will have to decide if he will support the US investors, or stand behind the present directors.
Magal said in response, "The company received the request this morning and is examining it. The chairman intends to convene the board of directors to discuss the request."
Magal's share closed at $2.57 on Nasdaq on Friday, giving a market cap of $26.7 million, and the share price fell 0.5% on the TASE today to NIS 9.96.
Published by Globes [online], Israel business news - www.globes-online.com - on June 13, 2010
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