The fact that communications equipment company Allot Communications Ltd. (Nasdaq:ALLT; TASE: ALLT) is looking for a buyer is nothing new. In recent months, following the company's poor results on the one hand and its bulging wallet on the other, inquiries were made by several parties likely to be interested in the company, but to date, none of these contacts have resulted in either any advanced negotiations or a deal. Nevertheless, it appears that efforts in this direction are continuing. Sources inform "Globes" that Formula Systems Ltd. (Nasdaq: FORTY; TASE: FORT), a technology holding company that controls Sapiens International NV (Nasdaq: SPNS; TASE: SPNS), Magic Software Enterprises Ltd. (Nasdaq: MGIC; TASE: MGIC), and Matrix IT Ltd. (TASE:MTRX), is taking an interest in the acquisition of Allot. Contacts on the subject have taken place, but have not yet yielded a deal at this point. It is believed that the prospective deal involves a considerable premium on Allot's market cap.
It was previously reported that initial contacts had taken place with Radware Ltd. (Nasdaq:RDWR) to consider a possible deal. Formula and Allot did not respond to the report. The Allot share is currently traded at $5.10 on Nasdaq and the Tel Aviv Stock Exchange (TASE), reflecting a $172 million market cap, following a 12% decline since the beginning of the year. Actually, a considerable proportion of Allot's market cap is due to the company's cash, of which it had $117 million at the end of the second quarter, indicating that the market is pricing the company's business at only $55 million. Like Allot, Formula is a dual-listed company. Its market cap is $512 million, and it is controlled by Polish company Asseco with a 46.3% stake. Formula had $325 million in cash at the end of the first quarter, so it should be able to pay for an acquisition on the scale of Allot. Formula's recent acquisitions were through its subsidiary, but Formula also made an acquisition several months ago, paying $25.8 million for 50% of TSG, formerly the security business of Ness Technologies. Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) bought the other 50% of TSG.
Managed by president and CEO Andrei Elefant, Allot provides solutions for more efficient use of core network communications equipment. The company has had difficulty for several quarters in recovering from troubles in its core deep packet inspection (DPI) business, while its business in added value and security does not make up for the decline of its DPI business.
Allot recently announced that it was restructuring, including, as far as is known, several dozen layoffs. Only this week, sources inform "Globes," George Soros's hedge fund became a party at interest in Allot with a holding of 2.2 million shares, amounting to 6.6% of Allot's share capital. The report led to a 4.6% spurt in the Allot share price on Nasdaq yesterday. Other prominent shareholders in the company include Zohar Zisapel (8.6%), the Fidelity Fund (8.3%), Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) (7.8%), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) (7.3%), and US investment institutions with smaller stakes.
Published by Globes [online], Israel business news - www.globes-online.com - on August 17, 2016
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