The board of directors of Mashov Computers approved the private allocation of shares to Formula Systems and the Shamrock Group. The deal will eventually make the two companies, along with a foreign investor, the controlling shareholders in Mashov. They will invest $17.4 million in exchange for 44.2% of shares, to be held equally by the two companies. In addition, the share packages held by Mashov’s managers and current controlling shareholders, David Assia and Jack Dunietz, will be diluted from 29.5% to 16.2% of share capital.
In addition, Mashov is negotiating with a foreign investor who may invest $2 million in the company and Reach a 1.8% holding.
It should be noted that the average price of the deal reflects a per share price of $1.25, 20% below Mashov’s current Tel Aviv market value. Mashov traded this morning at a company value of $27.2 million, and the current deal will be conducted at $22 million before money ($39.4 million after money).
The three-way deal, Mashov-Shamrock-Formula, amounts tot he conclusion of a journey that began at the beginning of 1998, when Mashov desperately needed cash to finance the activities of central subsidiary Magic, which is losing money and is traded on Wall Street.
Shamrock was mentioned at that time, and even reached an agreement in principal with Mashov’s owners concerning entry into the company by injecting capital in exchange for shares. However, in an unusual step the institutional investors in Mashov succeeded in preventing Shamrock’s entry, planned according to $24 million before money, 10% higher than the value at which the current transaction is planned.
the institutional investors opposed Shamrock’s entry in Mashov, on the grounds that it was possible to find a more suitable strategic partner in Mashov’s field of activity, and Formula was already mentioned then as better able to rehabilitate Mashov.
Brothers Danny and Gadi Goldstein, managers and controlling shareholders in Formula, did not deny their interest in Mashov, and conducted negotiations with Assia and Dunietz. One month ago, these negotiations bore their first fruits, when Formula signed an agreement to acquire control of Magic, Mashov’s loss manufacturer. According to the agreement, Formula will invest $11 million in Magic in stages and reach a holding of 26%, similar to Mashov’s holding, and will control Magic in practice, through appointing a majority of the company’s directors.
Formula is now affiliating Mashov itself to its investment portfolio.
Magic closed 1997 on a $10.5 million loss on $37 million in sales.
Mashov itself primarily due to Magic’s losses, lost NIS 25.4 million in 1997 on revenues of NIS 202.4 million. Mashov is expected soon to post capital gains of NIS 12 million in the Wall Street IPO of Paradigm Geophysical, which develops software for energy exploration.
Published by Israel's Business Arena April 12, 1998