Late in 1997, Benny Shabtai, an Israeli who made his money by importing Raymond Weil watches in the US, acquired control of Aryt Industries.
Shabtai’s main interest in the disappointing company was its holdings in technology company Telegate, which developed products for transmitting voice and data on cable TV infrastructure. In January 2000, at the height of the Israeli high tech boom, Telegate was sold to US company Terayon (Nasdaq: TERN) in a share swap, which reflected a company value of $100 million.
Aryt, which held 10% of Telegate, took advantage two months later of the surge in the Terayon share price to sell its Terayon stake at a profit of over $150 million. Past losses enabled the company to avoid taxes on the sales, and Aryt’s equity reached NIS 120 million at the end of 2000.
Today, two years after the Telegate deal, Aryt is back to where it was before it made that huge profit, if not still lower. The company accumulated NIS 110 million in losses in 21 months, and unfortunately, even more losses are liable to follow. The company was left with an equity of only NIS 10 million at the end of September; the survival of its main asset, Aryt Systems (formerly Ram-Zur) depends on continued support from the shareholders, and on achieving a profit.
Aryt Systems develops, manufactures, and markets high-tech military equipment. The company reported yesterday that Reshef Technologies, its main holdings, had laid off its 41 production workers in Sderot. This unemotional report became drama with last night's hair-raising news broadcasts of rockets hitting Sderot.
Reshef Technologies researches, develops, manufactures, and markets electronic fuses for military uses. Since the second half of 2001, the company has been paid consistently late by its principal customer, Israel Military Industries (IMI). At the end of the third quarter, the copany announced that the failure to collect its debt from IMI was jeopardizing its survival.
Aryt Systems reported that the lay-offs at Reshef Technologies were due to smaller defense orders over the past two years, and a recent lack of new manufacturing orders. Aryt Systems also reported that the company’s engineering activity at its Or Yehuda headquarters would continue in order to preserve the company’s technological capacities, and generate further revenue.
In addition to Reshef Technologies, which accounts for 50-55% of Aryt Systems’ revenue, Aryt’s engineering operations are conducted through Amcoram, which develops, manufactures, and markets training systems for ground forces, using both live ammunition and simulated firing.
Aryt Systems had a huge NIS 23 million loss on NIS 18.2 million in revenue in the first nine months of 2002, due to unexpected expenses, among other factors. The heavy loss caused the company a NIS 25.1 million equity deficit, as of September 30, 2002. The company auditor noted that the company’s continued existence depended on continued support from the shareholders and on the achievement of profitability.
Aryt Industries CFO Ran Eckhaus said that Reshef Technologies and Amcoram have been losing money for years, since their orders from IMI and the Ministry of Defense are insufficient to keep them afloat without support from their parent company. He said that Aryt Industries had recently decided to discontinue subsidies to its held companies.
Aryt Industries traded this morning at a value of only $1 million. A series of focused investments in a limited number of unsuccessful technology companies and losses on its industrial activity accounted for the fall in the company’s market value.
Published by Globes [online] - www.globes.co.il - on February 24, 2003