Gilat’s buyer crashes 20%; “Will affect shareholder pay”

“This deal is proof of that achievementYou found out In recent years, at the level of its business strategy, it has achieved the leading products it has developed, the global sales structure that has been built, the customers we have won and the company’s very high quality staff, “said today’s interview with” Globes “Yona Ovadia, CEO of Gilat. $ 577 million (operating value of $ 532.5 million, that is, net of the cash withdrawal that the Gilat had at the cash register). Ovadia thanked the company’s employees, adding that it believed the sale would drive continued growth, as well as saying it felt great pride in the deal.

Gilat is sold to the US company Comtech in a cash and stock transaction and at a price of $ 10.25 per Gilat share, a 1.4% premium on the market price – which has recently jumped following publications on a close deal. The market response to the announcement of the deal is quite chilly: Buyer Comtech shares fall 18.5% at the beginning of trading day on Wall Street and Gilat’s share slips 6.1%.

Could the market be disappointed that they expected a higher premium?

Adi Zafadia, CFO: “We always want more and more, but keep in mind there was advertising (about the possibility of selling Gilat, NIS) last Sunday, and the week before that the stock climbed. I do not want to suspect any qualifications, but if you offset these increases, it is a 30% premium on the share price. “In addition, Zafadia mentions that 30% of the payment is made in Comtech’s shares, so any decrease or increase in Comtech’s stock will immediately affect the price that Gilat shareholders Receive, and in accordance with the stock trading.

Buyer Comtech is an American company, and its owners say it started its satellite operations, and has expanded to other markets in recent years. “She makes lots of purchases and is active in the US 911 (Emergency Call Center), with location services, SMS, and the like. It’s a big, profitable company with over $ 100 million in EBITDA. In large, they act like a holding company, and they decided to buy Gilat because we are players in one of their key markets. ”

He said that today, most of Comtech’s sales are to the US, especially to DoD – the US Department of Defense. On the other hand, Gilat is slightly more familiar in the US and much more active in the rest of the world. “They saw our successes and decided it was the right thing to do,” says Safadia.

Obadiah adds, “In our opinion, and not only in our opinion, is the satellite market undergoing dramatic changes and creating tremendous opportunities. The market is creating opportunities for those who know how to move fast. This has been Gilat’s position for several years and today is the consensus. Anyone who wants to enter the market can do so only by “I think the Comtech management understands that there is huge potential here and that exploring can be their leverage to take a significant share of the opportunities. They run as a company with a lean headquarters and they will give Gilo tools to accelerate growth.”

According to its employees, Gilat’s traditional markets are still a great opportunity, citing, among other things, the Internet connection in aircraft and the mobility market, which is “constantly accelerating”. Ovadia notes that Gilat will continue to focus on this market, as well as communications networks in new constellations and enterprise networks. “The benefit of the unified company is a wider range of products – companies’ product offerings complement each other and minimal overlap; and another benefit is that Gilat can enter new markets where it has not been active to date. They can open the door for us in the US DoD market.” B, that’s the spirit of every technology provider. ”

Gilat is also active in the security market, but in recent years the field has not been part of its strategy, so according to its employees, Gilat’s security activity is currently minor, focusing only on Israel.

What do the employees say about the sale?

“Naturally, there are always uncertainties and concerns, so the employees want to make sure that the statement of intent is fulfilled and that there is no harm to the employees, so that the deal is received with a certain concern. The message from the purchasers through us is that Acceleration of Gilat’s development as a company based in Israel. ”

The expected $ 2 million synergies will come from Gilat’s cost savings as a public company. However, Comtech will be listed on the Tel Aviv Stock Exchange alongside the Nasdaq, probably because it will make it easier to allocate shares (as part of the transaction) to Gilat shareholders.

The acquisition will be funded by utilizing credit lines, and the merged company will have a large debt.

Zafadia: “There will be significant debt, they will use a credit line of close to $ 800 million, not just for the purpose of the acquisition. “EBITDA of the merged company and cash flow generation. It’s a 911 recurring income from a state that pays on time and dollars.”