Gilat Satellite Networks raised $270 million in Wall Street yesterday, a record amount for an Israeli company on the US capital market. The exercise was at a per share price of $57, 2% below the shares closing price of $58.25 on Wall Street last night. During Wall Street trading yesterday, the Gilat share fell some 7%, and the company was trading at a market value of $670 million. After the issue, Gilat will come near to the club of companies traded at a value of $1 billion.
Gilat’s issue was managed by five of the largest investment banks in the US - Merrill Lynch, Goldman Sachs, Oppenheimer, Lehman Brothers, and Salomon Smith Barney.
The offering included 4 million new shares and an offer for sale of 745,000 existing shares. In the offer for sale, the IDB group (Discount Investments and PEC) sold 500,000 shares, and the company’s founders and managers sold 245,000 shares. The issue underwriters were given an option to sell an additional 500,000 shares for some $29 million.
Discount Investments, together with PEC, will post a capital gain of NIS 106 million after tax, and, in the wake of the issue, the IDB group’s holding in Gilat will fall to 4.6%. If the underwriters’ option is exercised in full, the company will post an additional NIS 4 million capital gain.
Four months ago, the company announced the acquisition of GE Spacenet, of the General Electric group, for $225 million in shares.
Following the merger with GE Spacenet, Gilat is preparing to change its business focus. The merger has turned Gilat, which produces VSAT equipment - small satellite dishes connected to a modem - into a high-speed satellite communications company.
It is estimated that the merged company will achieve sales of $300 million next year, double the sales Gilat is expected to report at the end of the current year.
Gilat is expected to use the issue proceeds to provide its customers with leasing services for the satellite communications equipment it makes, in order not to fall behind the leading company in the field, Hughes Electronics. In addition, Gilat needs capital to finance the marketing expenses arising from the increased satellite time it leases from GE Americom to provide communications services.
In its six years as a public company, Gilat has managed four rounds of fund raising on Wall Street, three of them share issues and the fourth a convertible bond issue. Altogether, Gilat has raised $430 million.
Published by Israel's Business Arena on February 3, 1999