James,
Here's an article on what MRVC gets with Fibronics:
Hi-Tech News
Wednesday, October 9, 1996
Elbit's Civilian Company Looks to the Future
via Start-Up Investment
by Emanuel Timor
As time passes, Elbit president Emanuel Gil discovers more and
more how difficult it is to make the transition from the defense
to the civilian sector. Elbit has recently decided to divest itself
of data communications company Fibronics, selling it off to US
firm MRV.
Founded by several Israelis, MRV's central offices are located
in Israel. Elbit will sell MRV all Fibronics' properties for $22.8
million. Fibronics shares and liabilities - which are estimated at
$15 million - will remain in Elbit's hands. Elbit purchased
Fibronics from Elron via a private placement of 406,000
shares, valued at the time at $8.5 million. Elbit expects no more
than negligible capital gains on the sale.
Fibronics' 1996 revenues are expected to reach $30-35
million. The company, which employs 140 workers, is
considered one of Israel's sources of technological innovation,
but Fibronics is also a symbol of Israel's failure to translate
know-how into commercial success. In recent years, Fibronics
was a source of millions of dollars in losses for the Elron group.
Elbit will record a slight capital gain, but only having invested
$7.5 million in research and development, and working capital.
Elbit's reorganization into three business divisions is at a peak
of activity, expected to be concluded within two months. The
three divisions will be defense, medical and civilian products.
On paper this all seem grandiose. In fact, the current activity is
start-up in character, demanding large amounts of investment
capital and long periods of waiting, until it can be determined
whether the initiative is going in the right direction.
Elbit General Manager Igal Baruchi says the company's
strategy is "to grow via start-ups in the communications field,
primarily of connectivity between public and private
communications networks." He says Elbit plans to combine
Fibronics' technology, to which it still holds the rights, with
Israeli start-ups.
Elbit's third area of activity in the civilian sector is supplying
telephone services via the cable TV infrastructure. The
company is initiating a project to install 100,000 telephone lines
via TV cables, in China.
In each one of these projects, Elbit comes up against one of the
communications field's giants, such as Cisco, Madge, Alcatel,
Motorola, ECI Telecom and others. Each time one of the
major players acquires a technology they also invest millions of
dollars, at a rate of millions of dollars a week.
In order to compete with this phenomenon Elbit is making early
stage investments in technologies whose uncertain nature lowers
the purchase price. And as Baruchi explains, at the same time
Elbit is dividing itself in three in order to facilitate each division's
acquisitions by way of share placements, but also to realize
assets in the civilian sector, and to divest itself of businesses that
do not suit its vision for civilian technology.
For instance, Elbit has announced its intention to sell off 80% of
US subsidiary Inframetrics to its managers and a venture capital
group for $30 million. At the same time, Elbit executed an initial
public offering of Elbit Vision Systems (EVS) on Wall Street,
and is rehabilitating its television factory. All these measures
make Elbit's civilian division very interesting but risky as well |
