Given Imaging (Nasdaq: GIVN; TASE: GIVN) completed an $80 million issue on Wall Street at the end of last week. The company issued 1.5 million new shares at $32 per share for a total gross of $48 million, and netted $44 million, after deducting expenses (mostly payments to the underwriters). At the same time, current shareholders sold 1.05 million shares for $32.2 million. Given Imaging manufactures a pill that carries a miniature camera for diagnosing conditions in the small intestine.
The issue price was slightly lower than the closing price of $32.20, but on Friday, following the successful issue, the share spurted 8.1% to $34.80. Merrill Lynch led the issue, together with CIBC and Citigroup.
2004 is shaping up as one of the best ever for capital raising by Israeli companies. Since the beginning of the year, seven Israeli companies have raised $622 million in issues, $74 million of which was through offers for sale. At least two more issues are slated for this year: Shopping.com and Ness Technologies.
Surplus demand
“The issue was a great success,” said Given Imaging chairman and Elron Electronic Industries (Nasdaq: ELRN; TASE: ELRN) president and CEO Doron Birger. Elron, which owns shares in Given Imaging, will post a $6 million capital gain from the issue.
Birger says, “The issue was oversubscribed by hundreds of millions of dollars, and the best funds submitted bids at high prices. The issue price was closed at $32, above the average on that day. Furthermore, the share has risen in recent days, which is unusual. Shares of companies usually fall before an issue. That gives us at Discount Investment Corporation (TASE: DISI) and Elron confidence in our Given Imaging holdings, and in our decision not to sell in the issue.”
Following the issue, Discount Investment will report a NIS 40 million capital gain for the second quarter of 2004, including NIS 16 million for Discount Investment’s share of Elron’s profit from the issue. Discount Investment said that if Rafael Development Corp. (RDC), a partnership of Rafael and Elron, took advantage of the surplus allocation to the underwriters to sell more shares, Discount Investment would post an additional NIS 1.7 million capital gain.
IDB Holding Corp. (TASE: IDBH) is expected to post a NIS 16 million capital gain for the second quarter, while IDB Development Corp. (TASE: IDBD) will post a NIS 26 million capital gain.
Second issue
The current issue is Given Imaging’s second on Wall Street. In the first, which was held 30 months ago, following the World Trade Center terrorist attacks, the company raised $60 million at $12 a share.
”When you file an application with the US Securities and Exchange Commission (SEC), the share always falls immediately,” says Merrill Lynch Israel manager Yoram Inbar. “Between the time its application was filed and the issue date, the Given Imaging share rose 4%, while the shares of other companies fell an average of 8%.
”Furthermore, the discount on the issue price was low about 0.5% on the market price, due to a fourfold over-subscription from institutions, which piled up demand amounting to $240 million in their section of the issue. That’s $240 million in demand for $60 million in shares. Most of the demand was from the US market, including 75% from US concerns specializing in medical equipment, while 10% came from Israel, and the rest from Europe.”
Inbar says that the great demand and the partial allocation were what caused the sharp rise in the share on Friday. “Investors that did not obtain the shares they wanted in the issue bought shares on Friday,” he explains. “That explains the steep rise. In any case, we have options for another 376,000 shares, and I assume that if the share stays higher than the issue price, we’ll exercise the option long before the end of the 30-day period.”
Profit-taking could grow
Entities selling shares in the current issue included Rafael (Israel Armament Development Company), which owned 3.9% of Given Imaging, and now has 1.8%, after selling shares for $16.5 million. RDC, a partnership of Rafael and Elron, owned 11.8% before the issue, and sold shares for $7 million, leaving it with 10.3% of the company. OrbiMed Advisors LLC sold shares for $4.3 million, leaving it with a 14.4% stake in Given Imaging. Given Imaging CEO Dr. Gavriel Meron sold shares for $1.3 million, leaving him with 2.3%.
Although the issue is over, sales of Given Imaging shares may continue. Underwriters Merrill Lynch, CIBC, Citigroup, and Wells Fargo have options to increase the issue by an additional 376,000 shares. These shares will be sold by the company’s existing shareholders, who are likely to collect a further $12 million, in addition to the $32.2 million they have already received.
Given Imaging held its issue a moment before the company’s expected transition to profitability in the second quarter. The company lost $590,000 in the first quarter ($0.02 per share), on revenue of $12.75 million, compared with a $3.6 million loss ($0.14 per share) on revenue of $8.6 million in the corresponding quarter last year. Given Imaging says that its $44 million proceeds from the issue, which are on top of its previous $25 million cash reserves, are designated for strengthening the company’s position in the market.
Published by Globes [online] - www.globes.co.il - on June 21, 2004