According to the notice of annual meeting of shareholders to be held on December 31, 2012 there are 3 new nominees to Gilat's Board of Directors:
1. Ishay Davidi - the Founder and Chief Executive Officer of the FIMI Opportunity Funds.
2. Amiram Boehm - a Partner at the FIMI Opportunity Funds,
3. Kainan Rafaeli - a private investor.
Since I couldn't find any connection between Mr. Rafaeli and Gilat's line of business, hence it is plausible to assume that he is a third FIMI candidate to the board, giving FIMI disproportional representation on the board.
I don't think that such board is in the best interest of Gilat and its shareholders, hence I will vote my shares in the following manner: Davidi - yes (well, he controls 18% of Gilat's shares), Boehm - no, and Rafaeli - no. And I suggest that you, the shareholder, will do the same.
It looks to me, that they are taking our votes for granted. Well. not mine.
FIMI is getting very aggressive. Yesterday they bought additional 1.6 million Gilat shares for $7.85 million, at an average price of $4.90 per share, during trading on Nasdaq. FIMI now owns 7.7 million Gilat shares, which it bought at an average price of $4.10 per share (from Globes).
What is even more interesting, there is the clause in their original purchase agreement with Menora Mivtachim stating that:
"Pursuant to an agreement entered into by and between the FIMI Funds and Menora Mivtachim Holdings Ltd. ("Menora") on September 6, 2012, the FIMI Funds undertook towards Menora that if, during a period of 8 months following the date of the agreement, the FIMI Funds acquire from a certain entity additional shares of the Issuer constituting more than 5% of the Issuer's outstanding share capital at an average price per share exceeding US$ 3.57, then the FIMI Funds shall pay Menora an amount equal to the product of: (i) the difference between the average price per share at which such additional shares are purchased and US$ 3.57; and (ii) 4,424,858 (i.e., the number of Shares initially purchased by the FIMI Funds from Menora)."
This may indicate, that FIMI will have to pay additional 4.4M x (4.84-3.57) = $6.2 Million to Menora.
If they could wait until May, they will not have to pay this additional amount.
What do they know that nobody else knows? I wonder.
"FIMI nears control of Gilat
Yesterday, FIMI bought 4% of Gilat Satellite Networks for $7.8 million, raising its stake to 14.6%.
13 November 12 16:09, Ron Steinblatt and Shiri Habib-Valdhorn
Several months after acquiring its first shares in Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT), First Israel Mezzanine Investors Fund (FIMI), controlled by CEO Yishai Davidi, last night acquired a further 1.65 million shares (about 4% of the company's equity) at a price of $4.75 per share. The deal was worth $7.8 million (about NIS 30 million) and FIMI now has a 14.6% stake in the company.
FIMI acquired the shares from a number of sources, including businessman Meir Shamir, who sold $2 million worth of shares, and whose stake now falls to about 4%. He is expected to join forces with FIMI.
So far, FIMI has invested about $23 million in Gilat's shares, including purchases from Menorah Mivtachim Holdings Ltd. (TASE: MORA) several months ago and yesterday's acquisition. The average price paid for the shares is $3.89 per share. Since FIMI acquired shares from Menorah, Gilat's share price has jumped 43%, and its price was $4.99 per share at close of trading on Nasdaq yesterday.
This latest acquisition brings FIMI closer to York Fund's 19.6% stake, the largest shareholding in the company. York became an investor in Gilat in June 2005 when it bought Gilat's debt to Bank Hapoalim (TASE: POLI) and received an option to convert it to shares.
In September 2006, York converted the debt to shares for $71.4 million at about 35% above Gilat's current share price. Since then, York has sold some of its holdings. In Gilat's secondary offering at the end of 2006 it sold $20 million worth of shares at $8.50 per share, 70% above the current price.
Buying from York or linking up with it In contrast to FIMI, which is a private equity fund, which acquires control of companies and is actively involved in management, York is a hedge fund with purely financial investments. FIMI strives to be the controlling shareholder in companies in which it invests, and at this stage it is not yet clear if it will buy shares from York or join forces so that together the two funds will control Gilat."
According to the SCHEDULE 13D filled today by FIMI, they own now 6,064,693 shares, or 14.6% of Gilat shares. They are still far away from controlling Gilat. However, they have the right to appoint one director. IMHO
There is an interview with Gilat's CEO in today's Globes (in Hebrew). Where is the slightly edited Google translation. Part 1
Gilat's CEO: "We have to earn significantly more"
The entrance of FIMI fund into Gilat Satellite jumped the stock and focused the interest in the VSAT developer. Erez Antebi in an exclusive interview to Globes: “FIMI's investment is a vote of confidence in the future of the company”.
Hard to miss the sharp increase, about 30%, Gilat Satellite shares recorded in recent weeks. However, the company is very far from its highs - in 2000 the market value was $4 billion, and in 2008 it was expected to sell at the price of $475 million. The recent increase helped the share to recover from a low of three and a half years, and it is currently trading at a value of 179 million dollars.
Responsible for the momentum in the company, that develops VSAT equipment and provides related services, is Ishay Davidi, the FIMI fund manager that acquired 10.7% shares of the company. The fund is considered as one of the most successful private equity funds in the market with attractive exits from previous investments, and typically, it is not satisfied with holding a minority stake. Therefore, together with a report that the fund may lead to a change in the company board, it seems that investors see potential here for an Ormat style power struggle, or at least an opportunity to sell shares to FIMI at a higher price.
"FIMI has made a move that it saw as fit to do," says the CEO of Gilat, Erez Antebi in an exclusive interview with Globes. “FIMI is a very successful fund, and the investment is a vote of confidence in the future of the company.”
Were you surprised during or they talked to you before?
"We talk to a lot of parties all the time. We believe all the relevant parties in the market should recognize us, so we're talking with funds, also with FIMI".
- How the investment is seen by York Fund, the largest shareholder in Gilat?
"I believe that if someone wants to contribute, so like all investors they are seeing it in a positive way."
- Davidi plans to increase holdings. He must have talked about it with York, and Meir Shamir who invested with him in the past, who is also a shareholder of Gilat.
"I guess everyone is talking to everyone, Israel is a small egg, but we will continue to engage in matters of the company itself."
- Did Davidi contact you after the investment?
"Our relationship with them is like with any investor. We are professional management. Who are the shareholders, if they want to buy more shares or less, who is on the board - this is not the business of the Company's management."
If Gilat will be sold, it will be sold as a whole. There are 2 reasons:
1. All divisions are interdependent and service the same market.
2. The current valuation of Gilat is still very low: 180M for 400M company.
And the value of Gilat is much higher. For example, pls look at the interview with Patrick Biewer, CEO of SES broadband division it today's issue of Global Telecoms Business. Here are excerpts:
"People living in some of the remotest rural areas of Europe — and perhaps also the Middle East and Africa — will soon be able to get high-quality broadband at speeds up to 20 megabits a second for a cost that’s comparable with conventional broadband in urban areas.
It is a satellite, the first in a series of three, that will be delivering this new service. It went into orbit at the end of September and it will be followed by two more in 2013 and 2014.
“We’ll be able to serve 50,000 to 80,000 subscribers with each satellite,” says Patrick Biewer, the CEO of SES Broadband, the Luxembourg company that is operating the new satellite and is planning the other two.
...SES markets that service via operators such as Deutsche Telekom in Germany and NordNet, a subsidiary of France Telecom-Orange, in France. “We also have around 30 ISPs that market the service in Europe, the Middle East and Africa.”
...In preparation for the new marketing drive, SES has contracted two competing equipment makers, Newtec of Belgium and Gilat Satellite Networks, to produce the home equipment. “Satellite broadband is not yet an open standard,” says Biewer: so SES has to match the home equipment with compatible kit from the same maker at its own hub.
“Each company does hub and terminal equipment. But to the wholesaler the whole end-to-end system is transparent.” Wholesalers just have to buy the terminal modems from either vendor and SES will ensure the right kit matches up at its base station..."
The 150K - 240K target subscribers translates to $350M to $600M market. And the main target of the broadband satellite is not Europe but the rest of the world. And here were the value of Gilat lies. IMHO
As FIMI's web page states, they are a "Buy Out Fund."
Founded in 1996, FIMI is Israel's first dedicated and mezzanie buy-out fund. Benefiting from its extensive financial capabilities and the exceptional experience of its powerful management team, FIMI has created a successful track record of over 65 major transactions valued at more than $1.5 Billion.
If they do take them private I certainly hope an offer of at least $7 is on the table.
Sentiment: Strong Buy
There was an article in Globes last month titled "The Appetite of Ishay Davidi: Fimi Fund works toward taking over Gilat" (in hebrew only). In an essence the article suggest that Fimi, together with Shamir intend to take over Gilat. Today they control 16% of Gilat, and in order to take control they will need to buy twice as much. Shamir expressed his desire to take control over companies he invested on number of occasions, he was a party of the ill-fated buy-of attempt 3 years ago, while his cooperation with Fimi goes back for some time (around 2004 they together made an attempt to buy Gilat from Bank Hapoalim).
What makes the story even more interesting, that they may be not the only party trying to take over Gilat. Lets the race begin. IMHO