This is a lousy deal, and other than Eli and Eyal, I’m not clear that anyone has suggested this is a fair price. Most of the support for the merger on this board seems to have been “it’s a done deal, buy MLNX, and get over it.”
This is why I can’t get over it.
The company has $200 million in cash, no debt, and has just started with a sales ramp for the NP5 which should have strong sales for at least the next 3 years. NPS and TileMX are on the horizon and will likely obtain at least some market share.
As provided by EZ in their 10/13 submission to the SEC and shareholders.
“This analysis implied a range of value per Ordinary Share of US$20.07 to US$34.40. Barclays noted that on the basis of the discounted cash flow analysis, the Merger Consideration of US$25.50 per Ordinary Share was within the range of implied value.”
2016 should be a strong year for the company with NP5 growth and NPS sampling. Although never any guarantees, the financials should only become stronger this year. Given this, why would a CEO accept below the midpoint of the Barclay’s range ? I would think he would be insisting on the top of the range, or at least closer to it. Granted there are limitations of the analysis, but this is the best tool the company gave us to look at valuation.
It doesn’t make any sense unless there remains something in the short term we haven’t been told (which Eli denied during the cc), or this is deal between friends, something originally suggested in press releases and articles, and something EZ has now gone to lengths to deny.
If that’s the case, and all one needs to do is read the transcripts for it to be a legitimate concern,it speaks poorly to Eli and the board’s fiduciary responsibility to shareholders and for me raises the question of an additional risk in investing in publicly traded Israeli companies. As a MLNX shareholder it also makes me concerned as to how Eyal may view his shareholders particularly if he was approached with a buyout.
Although I expect no sweetening of the pot by MLNX before the vote, and I’d prefer an independent EZ, I think the most reasonable solution at this point is MLNX meeting the $34 price, ideally with a mix of cash and stock. It is a price supported by the financial analysis, and would likely be very cheap to MLNX in the long run. Although I may not grasp all the technologies, I also wonder about the timing of MLNX’s announcement with QCOM within 10 days of the EZ merger announcement, and what role. if any, EZ’s technology may play.
Honestly I don’t think we will see $ 34 but do feel it would be the right thing to do for shareholders and is a way for both Eli to save face and for Eyal to get the company he wants, and likely desperately needs. |
