Acquisition deal sends Top Image Systems soaring

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The share price rose 55% after Top Image Systems announced that it would be sold to competitor Kofax at a large premium.

<a target=new href=http://www.tis.co.il>Top Image Systems Ltd.</a> (Nasdaq: <a href=Javascript:viewInstrument('TISA',11,'EN')>TISA</a>; TASE:<a href=Javascript:viewInstrument('1082734',45,'EN')>TISA</a>), one of the longest standing Israeli companies on Wall Street, has seen its share price decline in recent years and has lost most of its market cap since the end of 2013. Yesterday, its share price shot up 55% on a huge volume of more than 100 times its daily average after it announced its sale to US company Kofax for $16 million.

<p>Under the agreement, Top Image Systems stockholders will receive $0.86 per share in cash for each ordinary share of Top Image Systems, representing a 65% premium over Top Image Systems' volume weighted average price (VWAP) over the past 30 trading days. Top Images Share Price soared to 0.83 yesterday, close to the acquisition price, reflecting investors' confidence that the deal will be completed. Completion is due by June 3. Should Top Image Systems cancel the deal for any reason, it will have to pay $561,000-750,000 compensation to Kofax. Top Image Systems' board of directors approved the deal unanimously. The deal requires approval by Top Image Systems' shareholders.

<p>Top Image Systems provides content processing solutions for enterprises. It was founded in 1991 by Itzhak Nakar, who remains its largest shareholder, with a 10.5% stake in March 2018. He will receive $1.6 million for his shares.

<p>Another large shareholder is US fund Trident Capital, which became a shareholder in Top Image Systems in 2014 when the latter bought a company in which the fund was invested in a cash and shares deal. In that deal, Trident Capital received shares worth $9 million at the time, but that are worth just $2 million according to the price in the current deal.

<p>Two years ago, Nakar stepped down as executive chairman of Top Image Systems and was replaced by a representative of Trident Capital, Don Dixon. Since 2016, the company's CEO has been Brendan Reidy. There is only one Israeli in Top Image Systems' senior management at present, Oren Ilan, Israel site manager Israel and VP for professional services. At the end of 2017, the company had 26 employees in Israel, down from 37 in 2016 and 43 in 2015. The company's workforce worldwide has shrunk, but the decline has been greater in Israel: 40% between 2015 and 2017, while the total workforce shrank by 23%, from 240 to 183.

<p>Kofax, a privately-held company based in California, is a competitor of Top Image Systems. It provides solutions enabling enterprises to manage complex processes. In the past, Kofax was part of the software division of Lexmark, but it is now held by private equity firm Thomas Bravo, the same firm that recently bought cyber company Imperva, another company with Israeli roots.

<p>Top Image Systems' 2017 report stated that there was a trend of consolidation in its market, and that this would represent an opportunity for it, but the results in the first half of 2018 were tepid, with revenue down 5% in comparison with the corresponding period to $1.4 million, and a net loss of $2.9 million, down from $3.6 million in the corresponding period. In fact, the last time the company posted a profit was in 2012. Adjusted EBITDA for the first half of 2018 was a negative $1.3 million.

<p>Top Image Systems CEO Brendan F. Reidy said, "We are pleased to announce this transaction with Kofax. The transaction will allow Top Image Systems to continue to provide its innovative content processing and remittance solutions to our customers while benefitting from the substantial resources of Kofax and Thoma Bravo. Our Board of Directors believes this transaction is in the best interest of our stockholders.”

<p><i>Published by Globes, Israel business news - <a href=http://en.globes.co.il>en.globes.co.il</a> - on February 5, 2019</i>

<p><i>© Copyright of Globes Publisher Itonut (1983) Ltd. 2019</i>

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Software development Photo: Shutterstock
Software development Photo: Shutterstock
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