Several months after announcing its intention to acquire ElectRoad and merge it into itself, Biomedix Incubator Ltd. (TASE:BMDX) yesterday signed a cooperation agreement in which Dan Bus Company will invest up to NIS 8 million, contingent on completion of the merger.
The agreement with Dan includes an initial NIS 3.1 million investment and options for Biomedix shares amounting to NIS 5 million at a company value of NIS 90 million.
ElectRoad has developed technology that turns the roads themselves into sources of power for electric cars. The cars derive their power from the road while driving on it.
Biomedix's share price surged 21% yesterday, pushing the company's market cap up to NIS 16 million. Since the plan for a merger between ElectroRoad and Biomedix was announced in August, Biomedix's share price has climbed 43%.
Avoiding the Better Place obstacles
ElectroRoad's technology uses magnetic conduction coils laid underneath the traffic lane to power the vehicles through magnetic induction. In order to utilize this source of power, the vehicles must have an electric motor that operates by this method.
The company decided to begin in public transportation, so that it could first lay its charger coils under the public transportation lanes and power only buses traveling in these lanes every day. In this way, ElectroRoad can penetrate the market gradually, while persuading a small number of decision-makers (thereby avoiding the obstacles encountered by ambitious venture Better Place, which appealed to the general market). The investment by Dan and the agreement between the companies indicates that public transportation companies are indeed interested in the technology.
Securities Authority wants explanations
The company's vision is many electrified roads in the future, with every vehicle getting power from them. CEO Oren Ezer, a former manager at Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), and CTO Hanan Rumbak, a former senior Elbit Systems engineer, founded ElectRoad in 2013.
Biomedix announced the merging of ElectRoad into it last August. The ElectRoad shareholders will receive 64-69% of Biomedix's shares (depending on how much cash Biomedix has). Biomedix, a former medical holding company, sold most of its holdings in the sector in recent years, except for small holdings in Allium Medical Solutions and Check-Cap.
A week after the report of the impending merger, Biomedix convened a general shareholders' meeting to approve an allocation of options to parties at interest in the company, headed by controlling shareholders Zeev Bronfeld and Meni Mor, Mor's relatives, and other senior executives and investors in the company. When fully exercised, the options constitute 44% of the Biomedix's share capital before the merger.
The options were allocated at an exercise price of NIS 4.19 per share, a 45% discount on the market price of Biomedix's share on the date following the announcement of the merger deal (and a similar discount on the share's current price). The Israel Securities Authority asked the company to explain why it had issued the options, and the company said that it was a way of raising money, so that the company treasury would have at least NIS 10 million, which was a condition for going ahead with the merger with ElectRoad. In response to the Securities Authority's enquiry, Biomedix said that it had elected not to conduct a public financing round because of the time required to complete one, and also because a public financing round was liable to fail and have a negative impact on the negotiations with ElectRoad.
Psagot Investment House Ltd. was later included in the allocations of options, and the potential amount to be raised was increased to NIS 4 million.
Most of the parties who received the options have already exercised them, including Psagot, which has since sold some of its stake, and is no longer a party at interest in Biomedix.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 9, 2017
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