The agreement whereby Israeli company Lightech Electronic Industries Ltd. was to have been bought by Carmanah Technologies Corporation (TSX: CMH) of Canada will not go ahead. Three months after Carmanah announced that it would pay $18.5 million for Israeli company Lightech, the deal has been cancelled.
A few days ago, Carmanah filed suit against Lightech in Toronto for $625,000, plus interest and costs, representing the advance payment it made. Carmanah makes solar energy products. It has a market cap of $26 million on the Toronto Stock Exchange.
Lightech chairman and CEO David Schreiber founded the company in 1992. It produces components for managing energy supply to LED, halogen, and other lighting units. Investors include Ghost Inc. (which has closed); Zvi Schreiber, who founded Unicorn Solutions Inc., which was acquired by IBM Inc. (NYSE: IBM) for $10 million in 2006; and foreign investors. Lightech posted a net profit of $800,000 on $10.6 million in sales in the first half of 2010.
Carmanah paid half the down payment, $312,000, in cash, with the second half put in an escrow account. The company says that is entitled to repayment of the full amount of the signing payment as Lightech did not honor terms of the contract.
Carmanah CEO Ted Lattimore said, "The contract says if the deal falls apart because of financing then we make an investment in [Lightech] and we get share certificates and they have refused to do that."
Carmanah needed to raise the capital to finance the acquisition, as it has no more than $7 million in cash. The merger agreement set a December 31 deadline. Carmanah was supposed to raise most of the capital for the acquisition through a $15 million bond issue.
Lattimore added that, despite the legal action, and any animosity it might stir between the two companies, he was still interested in Lightech. "It is not a friendly situation to have to go through this, but at the end of the day we targeted Lightech for all the right reasons, we still think it's a good company and I'd be happy with an investment in it and someday wouldn't mind owning it," he said.
Lightech declined to comment on the lawsuit.
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2011
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