Israeli company Spectronix Ltd. (TASE: SPCT), founded in the 1970s, which develops fire detection systems, will be sold to Emerson Electric (NYSE: EMR) for $99 million, therefore proving that old industrial companies can also produce exits. The price consists of $79 million in cash and $20 million to be distributed to the shareholders as a dividend. The share price for the deal is $11.67 ($9.31 without the dividend). At the current exchange rate, the share price amounts to NIS 44.23, a 31% premium on yesterday's closing price on the TASE. Following the news of the impending sale, the Spectronix share jumped 23%.
Spectronix develops sensors and fire and gas detection systems for the civilian market and systems for detecting and containing explosions in military vehicles. In its 2014 financial statements, the company said that one the characteristics of business in the civilian market was the merging of companies in the sector into major international companies, and also listed several parties in contact with Yechiel Spector, its controlling shareholder, who were considering buying shares for investment and to change the company's ownership structure.
Spectronix's 2014 revenue totaled $40.1 million, up 15% compared with 2013, and about the same as in 2012. Net profit was $5.3 million, double that of 2013, while the company posted a $1.8 million net loss in 2012.
Spector, 71, owned 35.5% of Spectronix before the acquisition, and will receive $35 million for his holdings (including the dividend). He has also been company CEO since 1979. Other prominent shareholders are Sky Fund with 16.5%, which will receive $16.3 million, and Yoel Carasso with nearly a 10% stake, who will receive $9.9 million. The investment institutions holding shares in Spectronix include The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) with 5.9% and Psagot Investment House Ltd. with 5.8%. A 75% majority of the shareholders at the meeting convened by company is needed to approve the deal. The chances that it will go through are good, because Spector, Sky Fund, and Carasso, who jointly hold 62.2% of the shares, have promised to vote in favor of the acquisition.
The structure of the deal with Emerson is a triple reverse merger. Emerson Process Management Asia Pacific, through which Emerson is making the acquisition, will merge into itself Vulcan, a fully owned subsidiary of Spectronix. When the merger is completed, Spectronix will become a private company fully owned by the acquiring company.
Emerson Process provides measurement, analysis, and management solutions for energy, chemical, mining, and other companies. It is part of the Emerson group, whose market cap is $37.8 billion.
If Spectronix calls the deal off because it is not approved at the shareholders meeting, or because a different acquisition offer is accepted, Spectronix will pay Emerson $4 million in compensation (about 5% of the value of the deal, excluding the dividend). The agreement with Emerson also includes clauses establishing the acquiring company's obligation to continue its business in Sderot.
Published by Globes [online], Israel business news - www.globes-online.com - on June 29, 2015
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