Magic to acquire BluePhoenix's Appbuilder activity for $15m

Shekel volatility after US tariffs announcement

The sale of a non-core business, such as Appbuilder is therefore logical for a company with just $8.1 million in cash and a negative cash flow.

Sources inform ''Globes'' that Magic Software Enterprises Ltd. (Nasdaq: MGIC; TASE: MGIC) is in advanced talks to acquire Appbuilder activity of BluePhoenix Solutions Ltd. (Nasdaq: BPHX; TASE: BPHX) for $15 million. The Appbuilder is a development environment for the management and maintenance of large business applications. Software integration solutions developer Magic has been seeking to expand its business for several months, and legacy software optimization developer BluePhoenix apparently fits the bill.

Magic had $47.4 million in cash at the end of June, after raising $21 million in a private placement earlier in the year.

Magic VP M&S Amit Birk once told "Globes", "What guides us is for the company to be mature and in good financial shape, and to have a customer base that includes blue-chip companies. The idea is to open doors on the basis of the customer base for Magic's products too."

BluePhoenix is in transition and its CEO Arik Kilman will leave at the end of the year. The company has published disappointing results for the past several quarters, and stated in its financial report for the second quarter that it was seeking to strengthen its financial resources and that it would focus on it core business. The sale of a non-core business, such as Appbuilder is therefore logical for a company with just $8.1 million in cash and a negative cash flow. In the financial report for 2010, the company said that the Appbuilder accounted for 20% of revenue, i.e. $11.5 million.

Magic and BluePhoenix were once sister companies controlled by Formula Systems Ltd. (Nasdaq: FORTY; TASE: FORT), now controlled by Poland's Asseco. In 2007, when Formula was controlled by Emblaze Ltd. (LSE: BLZ), it sold its stake in BluePhoenix for $64 million, reflecting a company value of $140 million.

Magic's share price fell 0.2% at the opening on Nasdaq today to $4.29, giving a market cap of $135 million and fell 0.4% on the TASE to NIS 15.41, after initial gains. BluePhoenix's share price rose 4.9% at the opening on Nasdaq to $0.77, giving a market cap of $18 million, and 0.8% on the TASE to NIS 2.70, after rising over 6% earlier.

Published by Globes [online], Israel business news - www.globes-online.com - on October 24, 2011