Apparel manufacturer Tefron Ltd. (Bulletin Board: TFRFF; TASE:TFR) will have a busy day today. Shareholders are due to convene this morning in Petah Tikva to approve a deal with Canadian apparel manufacturer Nouvelle. In the afternoon, Central District Court Judge Avraham Yaakov will hear claims by an investor, Danny Magen, against the company's shareholder, Mivtach Shamir.
Tefron is a manufacturer of seamless textiles, regular textiles, and swimwear. The company fell into financial troubles a year ago, and its future was in doubt. A recovery process was initiated following an agreement with the banks with the help of Meir Shamir-controlled Mivtach Shamir Holdings Ltd. (TASE:MISH) and First Israel Mezzanine Investors Fund (FIMI).
A few weeks ago, Tefron raised $5.2 million and announced the acquisition of the seamless business of Nouvelle. As part of the deal, Nouvelle's controlling shareholders, Canada's Lieberman family and current Tefron investors, including Mivtach Shamir, would inject capital into Tefron in exchange for a joint 49% stake in the company.
Tefron's share price for the deal was set at $2.10, a 20% discount on its market price at the time. For this reason, Magen therefore claims that approval of the deal represents a benefit worth several million dollars to the investors, including Mivtach Shamir, whose representatives serve as Tefron directors and officers.
Mivtach Shamir rejects Magen's claims, but offered him to take its place in the deal in the amount of $1.3 million. Although Magen agreed, Nouvelle considered this a breach of the deal's terms, and Mivtach Shamir withdrew the offer. Magen also demanded that Tefron hold a rights issue at the deal's share price in order to prevent discrimination of shareholders who were not part of the deal.
Judge Avraham will hear the case in the presence of the parties, on whether the proposed allocation, if approved, should go to Mivtach Shamir, or if Mivtach Shamir's rights to the shares are subordinate to Magen's rights.
Tefron CEO Amir Meridor recently said, "This deal is built like a puzzle. When one piece is removed, everything falls apart. It's not possible to remove Mivtach Shamir, because the Canadians won't make the investment."
Tafron's share price rose 1.1% in New York yesterday to $3.51, giving a market cap of $10.8 million. The share price was unchanged in morning trading on the TASE today at NIS 13.10.
Published by Globes [online], Israel business news - www.globes-online.com - on December 29, 2010
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