UK retailing and real estate group Lewis Trust Group announced today that its LTG International (LTGI) unit was seeking to take over Israeli VC fund Sadot Research and Development Fund.
LTGI today published a tender offer to all Sadot shareholders, saying it was seeking a 75% holding in the company. LTGI currently owns about 8.2% of Sadot’s equity, meaning it is tendering for 66.52% of the company in the current offer.
Sadot, which lists on the Tel Aviv Stock Exchange, is owned 15% by Yitzhak Tshuva's Green Venture Capital. Bank Leumi and Bank Hapoalim’s mutual funds own another 20% of the company.
The offer quotes a price of NIS 2.20 per share, reflecting a company valuation of $18.7 million. The value is based on Sadot’s non-invested cash at hand after assuming liabilities of future payments of management fees to Sadot Venture Capital Management (SVCM), Sadot’s management company.
Sadot shares rose 13% to NIS 2.10 after the tender offer announcement.
LTGI Director Michael Rosehill said that "the offer price is 17.6% higher than Sadot’s share price prior to the submission of our offer. We've seen a continual decrease in value in Sadot and we intend that steps can be taken to realise the company’s real value over the longer term as a result of this action".
Investors have a three-week acceptance period from the issue of the tender, and a further week to tender shares. A minimum 50.01% acceptance level is required, Lewis Trust Group says.
The Lewis Trust Group is owned by the British based Lewis family. As well as owning River Island, the high street fashion chain, the Lewis's are also prominent investors in the Israeli economy, owning a controlling interest in the Isrotel hotel chain, among other financial investments in the country.
Lewis Trust Group said it was bidding for Sadot despite the “significant uncertainty” that surrounded the company. According to LTG, Sadot holds $29 million in hand, out of which nearly $8 million are committed as future management fees, as well as additional liabilities of $1.5 million.
In addition, Sadot’s management company charges a fixed percentage of Sadot’s issued capital each year, regardless of net assets or share price performance. The management company holds a “cherry picking” right to acquire 15% of Sadot’s holdings in any portfolio company retroactively (excluding two portfolio companies). This structure of management fees as well the generous “cherry picking” right, is not-customary in the VC industry, LTG says.
Sadot’s investments in portfolio companies are valued at the end of the third quarter at $15 million. But LTG says there is little certainty regarding the future value of the current portfolio, due to the current unfavourable climate of the Israeli technology industry, and the general decline in global markets, especially in the technology field.
Published by Globes [online] - www.globes.co.il - on 16 December, 2002