Koor to Acquire Control of ECI for Approximately $295 Million
TEL AVIV, Israel--(BUSINESS WIRE)--Feb. 26, 1998--
Separately, Koor Approves Plans to Reduce
Its Mashav Ownership to 25%
Koor Industries Ltd. (NYSE: KOR) today announced two transactions through which Koor will purchase at least 13.5% of ECI Telecom Ltd. (Nasdaq: ECILF) and expects to appoint a majority of the telecommunications and data transmission systems company's board of directors.
Through the transactions -- one with Claridge Israel, which owns 26.4% of Koor, and a Claridge affiliate, and the other with Clal Electronics Industries Ltd. -- Koor will purchase 10.4 million shares of ECI, or 13.5% of the 76.6 million shares outstanding, for approximately $295 million. The agreement with Clal Electronics also includes Clal's commitment to execute a proxy supporting Koor's slate of directors nominated to ECI's board, with Clal Electronics retaining 20% board participation.
The transactions provide for Koor to acquire at least 6.55 million shares, or 8.5% of ECI's shares, directly from the Claridge Group at $28 per share. At the same time, Koor will acquire 5%, or 3.83 million shares, at $29.25 per share from Clal Electronics.
The Clal transaction also entails a "put/call" arrangement through which Koor may acquire an additional 3.83 million ECI shares from Clal Electronics in January 1999. Clal has the right to sell these shares to Koor at $29.75 per share, and Koor has the right to purchase the shares at $37.00 per share. The purchase of ECI shares from the Claridge Group, which was approved today by Koor's board of directors, replaces an agreement reached last November and is subject to shareholder and other regulatory approvals.
Commenting on the ECI transactions, Benjamin D. Gaon, president and chief executive officer of Koor, said: "Establishing an influential stake in ECI, an industry leader, is synergetic with our existing telecommunications and electronics businesses. This Koor segment already accounts for approximately 40% of our overall revenues and 50% of operating profit. In addition, the acquisition of a controlling interest of this export-oriented company should help us to achieve Koor's strategic objective of becoming even more multi-national."
ECI Telecom designs, develops, manufacturers and markets digital telecommunications and data transmission systems, enabling network operators to deliver cost-effective services. The Petah Tikva, Israel-based company's systems provide capacity expansion, flexibility and management functions to utilize existing and new telecommunications, data and integrated networks more effectively. ECI reported 1977 revenues of $678 million and net income of $132 million or $1.73 per share.
Mashav Transaction
Separately, Koor announced today a transaction with Clal Industries and Investments Ltd., enabling Clal to gain controlling interest in Mashav Initiating and Development Ltd., of which Koor and Clal each own 50%. Mashav's largest business is Nesher Israeli Cement Enterprises Ltd., the country's sole manufacturer of cement.
Koor's transaction with Clal includes an option to purchase from Koor an additional 25% of Mashav, which may be exercised from 15 months until 27 months following the closing of the final agreement. The fair market price for this stake will be determined within the initial 15 months by an independent evaluator, and Clal would also be required to pay Koor an additional $10 million to gain control of Mashav.
Prior to the exercise of the option in the Mashav transaction, Koor and Clal will seek to bring in a 20% strategic or financial partner for the cement business. Granite Hacarmel Investments Ltd. and Tambour Ltd., two other Mashav holdings, would also be sold prior to the exercise of the option, with proceeds going to the Mashav shareholders. If Clal's purchase of Koor's Mashav shares is not executed, Koor would be free to sell any and all of its Mashav shares to any third party, and that could include Koor exercising its right to make a public offering of Mashav shares. In any case, Koor has committed to the Israeli government's Controller of Restrictive Trade Practices to reduce its stake in Mashav to no more than 25% by January 2002.
Definitive agreements for the Koor/Clal transactions must be signed within 30 days and are subject to approvals of both boards and applicable regulatory agencies. |
