Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT) has filed a $21.5 million lawsuit against Eltek ASA (OSL: ELT) with the Olso District Court over its acquisition of Norwegian company Nera Networks AS from Eltek for $48.5 million in January 2011. Ceragon has filed a writ of summons alleging breaches of representations and warranties under the share purchase agreement
In July 2012, Ceragon demanded $18.6 million in compensation from electronics manufacturer Eltek, over the Nera acquisition, citing various clauses in the share purchase agreement. Ceragon's claims relate to unforeseen expenses in the acquisition, such as legal proceedings involving employees, and expenses for subcontractors.
Eltek says that when it receives the writ of summons, it will review it and the documentation to determine if there is any basis for any of the alleged breaches. It adds that its liability under the agreement is capped at $22 million, except for the liability relating to title, tax and illegal payments, which is limited to the purchase price. The limitations can only be set aside if there is gross negligence, willful misrepresentation or willful misconduct, or fraud on Eltek's side, which it denies.
The acquisition of Nera gave Ceragon, a maker of short-haul wireless backhaul systems for telecommunications carriers, long-haul capabilities. It also expanded Ceragon's markets; the company operates in North America and the Asia-Pacific, and Nera operates in Latin America and Africa.
Following the acquisition, Ceragon fired 200 employees, mostly overseas, and restructured. A year later, Ceragon CEO Ira Palti told "Globes" that he was pleased by the acquisition of Nera and the price paid. "We acquired it at a very low price, just pennies," he said. "Ceragon and Nera had the same rate of sales, but we were profitable and it was not, so we knew that we'd have to invest more in it beyond the amount of the acquisition."
Published by Globes [online], Israel business news - www.globes-online.com - on June 25, 2013
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