Following negotiations that won widespread coverage in the Israeli press and attracted much attention from the Israeli venture capital community, the Libit deal was struck over the weekend. Libit, an Israeli start-up company, develops signal processing silicon chips enabling fast-speed communication required in various applications, such as Internet video and data transmission. Libit was sold to Texas Instruments for $330 million, apparently only a few days after Libit called off a previous deal under which it would have been sold to Lucent for $260 million.
Given the fact that a number of Israeli companies are sold to foreign investors every year for tens and hundreds of millions of dollars, another deal would not be expected to provoke much interest. Yet it seems that, in Israel, the procedure is incomplete without the routine pat on the back for the entrepreneurs and investors who "made it big", without rooting for other high-tech entrepreneurs, and, last but not least, without hue and cry from government officials and industry executives lamenting for the "liquidation" of Israeli high-tech.
The three founders, on the other hand, are evidently trying to keep their distance and keep their cool. This time around, they’re not a bunch of pony-tailed, goatee-bearded, and nose-ringed youngsters (see under "Mirabilis"). Libit’s founders are in their fifties, and come from the top ranks of academe, where they hold the titles of professor and doctor in electronic engineering. They all engaged in development in the Israel Defense Forces, where they made each other’s acquanitance.
Libit general manager, Prof. Ehud Weinstein, served in the past as head of the Tel Aviv Electronic Engineering Department, and is currently on an MIT research laboratories fellow and a member of its electronic engineering department staff. Considered a world authority in signal processing, Weinstein has won a number of awards for his developments. Now that he is about to pocket $69 million, he will also be well-known at his local bank branch.
Libit’s chief scientist, Dr. Moody Segal, used to be the chief scientist of Israeli company Orckit, a leader in ADSL (fast-speech Internet communications modems). Segal, who earned an electronic engineering PhD from Tel Aviv University, also won a couple of awards, including the Wolfson award, for his developments. He held senior development-related posts in the IDF. Segal will have to content himself with the more modest sum of $63 million. Libit’s vice president for business development, Dr. Ofir Shalvi, will get only $43 million.
Discount Investments and venture capital fund Giza, on the other hand, have struck a gold mine. Discount Investments, which holds 8.2% of Libit’s shares, was the first to believe in Libit, in which it invested at company value of $30 million. Discount Investments’ colossal capital gain - some NIS 100 million gross (NIS 50 million net) - testify to the talents of Dr. Micha Engel, Discount Investments deputy general manager, who announced his retirement from the company long ago.
Giza partners Zeev Holzman and Zvi Schechter are also wearing a broad smile and a proud expression. Their investment in Libit ("an investment that took a lot of guts to make", Schechter told "Globes" about a week ago) of $6 million at company value of $74 million, is now worth $23 million. That’s a fourfold increase in less than a year.
Published by Israel's Business Arena June 20, 1999