As first reported by "Globes", Elscint has formally announced the sale of most of its business activities to US company General Electric and the British Picker concern. The announcement was conveyed to the American stock exchange by Elscint and its parent company Elbit Imaging, only after the close of Wall Street trading, so that the company’s shares did not respond to the deal.
However, this morning in Tel Aviv, trade opened with Elbit Imaging, which holds 58% of Elscint shares, sharply rising 25%. This gave Elscint investors high hopes. For years, they have vainly anticipated a company business breakthrough. The company shows extremely slow growth in revenues, has difficulty increasing its market share for medical imaging products, and its net profit usually holds no pleasant surprises. Finally, last night’s deal could yield the long-awaited return for Elscint shareholders.
Emanuel Gil, appointed Elscint president this month after Jonathan Aderet resigned slamming the door, closed two similar deals at the weekend for a total of $375 million.
In the larger deal, Elscint will sell its activities in the CT field (Computerized Tomography) to the British Picker concern for $275 million. Picker belongs to General Electric Company (GEC) of Britain, which has annual sales of $18 billion. It has no connection to the US company General Electric.
The second deal, for $100 million, is the sale of its MRI and Nuclear Medicine divisions to US General Electric, which has been cooperating with Elbit Imaging Group for a long time. This activity includes development sites in Israel, the US and Britain. The exact amounts of the two deals are still subject to adjustments, mainly calculation of taxes, restructuring costs and other one-off allowances.
The value of the two deals is most impressive. Elscint traded two weeks ago based on a company value of $100 million, and following reports on the deal in the press prior to the formal announcement, the company value soared to $150 million. It appears that Gil succeeded in surprising Elscint and Elbit Imaging investors, and the deals reflect a company value which is 2.5 times higher than Elscint’s total value.
Elscint and Elbit Imaging capital gains as a result of the two deals are expected to be extremely high, although the companies were still unable to stipulate any figures, due to the complexity of the deals.
Moreover, the deal does not leave Elscint without content, merely with cash. Elscint sold its three major divisions, whose primary asset is its development teams. If we add to it the sale several months ago of Elbit Ultra-Sound by Elbit Imaging to General Electric for $228 million, not much is left of the classic Elscint that employed almost 1,800 workers.
Nevertheless, on closing the deal Elscint will remain mainly with manufacturing activities of specialized products, considered as having technological advantage over most manufacturers in the medical imaging field.
Elscint manufactures systems for a variety of medical imaging equipment, and apart from the ongoing supply of systems to General Electric and Picker, it will be able to sell its equipment to other companies in the field as well (Siemens, Philips and others).
Elscint also remains with the company’s smallest division activities, the mammography division, which employs less than fifty workers. Another Elscint holding is Elgems, equally held by General Electric, which is engaged in a specific field of nuclear medicine.
In the deal with General Electric, the US concern has the option of purchasing Elscint’s share in Elgems for $30 million. If the option is exercised, General Electric will post a fourth acquisition from the Elbit Imaging group within a year (Elbit Ultra-Sound, MRI and Nuclear Medicine divisions and half of Elgems).
Published by Israel's Business Arena September 13, 1998