Technology company Amdocs Ltd. (Nasdaq: DOX) is combining with businessperson George Horesh in buying Teva's land in Ra'anana. As reported by "Globes," Horesh, who sold the land to Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) two and a half years ago has decided to exercise his first refusal rights to buy it back. Amdocs, which last September announced its intention of buying the land from Teva in order to build its new campus there, announced yesterday that it had signed a partnership agreement with the Union group, owned by Horesh, for the purpose of buying the land. Completion of the deal is slated for the near future.
It appears that the current deal is very profitable for Horesh. Horesh, owner of Union Motors, the official importer of Toyota in Israel, is one of Israel's wealthiest people, and also has substantial holdings in real estate, energy, and technology. Amdocs said in its announcement, "The partnership with the Union group will benefit from its great expertise in real estate development."
Amdocs, managed by CEO Eli Gelman, provides IT solutions and systems to communications companies, and has a $9.4 billion market cap. The land being purchased, located in the northern Ra'anana industrial zone between Hadafna, Hatidhar, and Hadolev Streets, is part of a giant plot purchased by Horesh in 2010 from Comverse.
Teva bought the land from Horesh in 2015 at a price believed to be NIS 200 million in order to build a new campus to house its headquarters, currently located in Petah Tikva, and other activity. The campus was meant to save Teva millions of dollars a year in expenses, but the plan was suspended in recent months, due to Teva's debt ($34.7 billion at the end of the third quarter) incurred as a result of its acquisition of Actavis last year. In order to service its debt, Teva began selling assets, and the sale of the land in Ra'anana was part of this process. Teva recognized a $42 million decrease in value related to real estate in Israel in the third quarter.
Amdocs's net investment in the purchase of the land and the construction of its campus is likely to reach $350 million over 4-5 years, which it will finance with its own resources; the company had $980 million cash at the end of the third quarter. The investment in the campus includes up to $100 million in capital investment in the 2018 fiscal year. Excluding this investment, Amdocs's free cash flow is expected to reach $500 million in 2018, all of which is earmarked for the company's shareholders through its buyback program and a distribution of dividends.
Amdocs says that beyond 2018, it expects to distribute most of its free cash flow to its shareholders after an adjustment for its investment in its campus. The company believes that in the long term, construction of the campus will have a positive effect on its profit per share. Amdocs's main center of activity in Israel is in Ra'anana, and the company also has activity in Haifa, Sderot, and Nazareth. Amdocs has been in its current offices since 1996. The company recently extended the lease it signed with the owners of the property - REIT 1 Ltd. (TASE:RIT1), which owns 60% of the property; San Gold Resources; and Sunflower Sustainable Investments Ltd. (TASE: SNFL) by 10 years. Amdocs has an escape clause in its lease upon five years notice, valid until June 2022.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 7, 2017
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