In an unusual defense industries collaboration between Israel and the UAE, Thirdeye Systems (TASE: THES), which develops electro-optical recognition systems for drones integrated with AI capabilities, today announced that it has signed an agreement and established a joint venture with Abu Dhabi's Edge Group.
As part of the agreement, Edge will invest $10 million for a 30% stake in the Israeli company and will become Thirdeye's biggest shareholder. The deal will require approval by Israel's Ministry of Defense.
Thirdeye's market cap is $23.3 million, while the deal reflects a valuation of $31.1 million - a 25% premium. However, it should be remembered that this is a small and extremely volatile stock. For example, after the outbreak of the war, the stock tripled in value within six months, but since the peak in May 2024, it has plunged 50%.
In addition, the parties will establish a joint venture in which Edge undertakes to invest $12 million. Edge will hold 51% of the shares of the joint company, Thirdeye will hold 43% and a third party will hold 6%. According to Thirdeye, the joint company will engage in the development, commercialization and marketing of electro-optical identification systems, focusing on certain territories around the world.
The buyer: A conglomerate with an order backlog worth $12.8 billion
Edge is a UAE tech and defense group founded in 2019, which brings together more than 25 companies specializing in military and civilian solutions and has over 12,000 employees. The company operates in 140 countries, and its order backlog is $12.8 billion. The group develops advanced technologies, including unmanned systems, electronic warfare, cybersecurity, air, land and sea systems, as well as precision weapons systems. It aims to provide innovative and rapid solutions for the defense and civilian market, while collaborating with international partners and adopting advanced technologies such as autonomy, robotics and smart materials.
Thirdeye was founded in 2010, and held its IPO in 2021. The company develops advanced AI-based solutions for optical systems and autonomous tools, with an emphasis on security and defense. The company specializes in edge AI applications, providing real-time image processing technology for surveillance and control in challenging conditions. Over the past three years, the company's share price has risen 10.8%, but in the past three months has fallen 38.1%.
The company's solutions provide a rapid response to changing threats, including protection against drones, something Israel was clearly not prepared for in the war. Thirdeye products are designed to be mobile and operate 24/7, while providing an optimal response to operational units in the field. The solutions focus on combining AI with defense and security control systems.
However, the company's results are far from positive. Despite a significant 71% jump in revenue, sales only reached NIS 9.8 million in the first half of 2024. Gross profit jumped by only 41% to NIS 3.8 million, with an operating loss of NIS 902,000 in the first half of the year, while a jump in financing expenses actually deepened its net loss by 26% to NIS 3.2 million.
In addition, the company recorded negative cash flow from operating activities of NIS 3.2 million and it only had NIS 7.1 million cash on June 30, 2024, mainly due to a loan from an investor. The company's total assets at mid-year amounted to only NIS 22.4 million.
EDGE Group President and CFO Rodrigo Torres said, "This transaction reflects our confidence in Thirdeye Systems' solutions, which provide a critical layer of protection in unmanned aerial vehicle detection. We believe this collaboration would benefit both parties and accelerate the development of new products to enhance identification capabilities in the evolving modern warfare."
Thirdeye Systems CEO Lior Segal added, "We are excited to collaborate with EDGE Group, a global leader in defense technologies that has expressed confidence in our company. This technological and security partnership sends a strong message about the capabilities of our AI-driven products and their contribution to national security. Aligning efforts with a company of EDGE’s caliber presents a significant opportunity to advance innovative technological solutions. We are confident that this collaboration will significantly boost the growth and development of Thirdeye Systems and reinforce our position as a leader in international electro-optical detection systems. Partnering with a globally recognized supplier like EDGE will help us showcase Thirdeye Systems' technological advantages and further expand our footprint in additional international markets."
Published by Globes, Israel business news - en.globes.co.il - on January 28, 2025.
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