RT-SET Raises $48 Mln in Frankfurt

The round was held at a company value of 4132 million. Or-Ad, RT-SET’s rival, plans to issue next week.

RT-SET of the BVR Technologies group completed an IPO on the Neuer Market in Frankfurt at the end of last week. At the issue, managed by Dresdnener Bank and Shroeder, the company raised Euro 45.5 million (about $47.6 million). RT-SET issued 3.5 million shares at Euro 13 per unit, with a million shares being sold off by the company’s controlling shareholders. Following the issue, the company’s value is $132 million. BVR Technologies, which is traded on Wall Street at a company value of $70 million, sold $8 million worth of shares, and its stake in the company fell from 53.3% to 31.34%. After the issue, the company’s ownership structure is as follows: the Star Fund (6.29%), the Coral Fund (4.84%), the Concord Fund (4.84%), China Development Bank (3.22%), Chyron (3.17), and EVT, a US company that has been bought and that holds 1.99% of RT-SET.

The issue underwriters have an option to buy another 525,000 shares. Should this option be exercised, BVR will pocket another $4 billion. RT-SET develops systems for virtual 3D graphic imaging of Television studios. The systems’ performance could be seen on Israel Channel 2’s coverage of the last elections. The virtual studio’s advantage is that it eliminates the need for real-life decor, thereby saving time, manpower, and space for storing the sets. RT-SET’s major rival is Israeli company Or-Ad, which is scheduled to issue on the Frankfurt stock market, and raise $40 million at a company value of $170 million.

Or-Ad claims it controls 60% of the market, while RT-SET has no more than 25%. RT-SET, however, contends that its market share is as big as 30-35%, and stresses that the most important market is the prime-time live broadcast market, of which it controls more than 50%.

The two companies have similar products, yet with a different focus. RT-SET focuses on direct broadcasts, whereas Or-Ad concentrates on international sports broadcasts. Or-Ad enables television networks to "plant" ads on existing space around stadiums, thereby expanding advertising.

Examination of both companies financial reports reveals that both are still struggling for profitability. Or-Ad, the older of the two, has a larger sales volume but is still posting losses. In 1998, sales were some $14 million on losses of $411,000, while for the nine month period of 1999, sales were $8.2 million on losses of $2.4 million.

RT-Set, by contrast, posted decreased revenues of $3.51 million on losses of $4.16 million for the nine month period in 1999, as compared with $4.12 million in revenues on losses of $928,000 for the parallel period last year. Sales for all of 1998 were $5.76 million on losses of $2.25 million.

The reason for the decline in revenues, claims the company, was reorganization which included moving management to the US, the nomination of Shmuel Nimrodi (former CFO of Indigo) as CEO and the acquisition of two small US-based companies with complementary technologies. Q3 1999 revenues were $2.2 million – the highest in the company's history – on a "respectable" loss of $1.5 million.

It would appear, because of the two companies domination of the virtual set market, that a merger might be desirable. But, as always, the attempts to merge have failed due to divided opinions on company ownership (ego, ego, ego).

Published by Israel's Business Arena November 7, 1999

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