After a surge of 218% since the beginning of the year and 386% in the past 12 months, it's time for profit-taking at Magal Security Systems (Nasdaq: MAGS; TASE: MAGS). Controlling shareholder Mira-Mag Inc., controlled by Magal chairman and CEO Jacob Even-Ezra and Magal director Nathan Kirsh, has sold 1.6 million Magal shares for between $15.53 and $21.23 for a total of $31.5 million. The shares were sold between March 24 and April 2. This is the largest sale of shares on Wall Street by Israeli insiders so far this year. Despite the sales, Magal's share price rose to an all-time high of $24.94 yesterday, reflecting a market cap of $195 million.
Mira-Mag's stake in Magal has fallen from 51% to 31%. This is a quick turnaround for Mira-Mag. It bought Israel Aircraft Industries' (IAI) 11.9% stake in Magal at $7 per share, reflecting a market cap of $54 million, in July 2003. Mira-Mag has tripled its investment, earning $13 million.
The rise in Magal's share price in the past month is attributed to the accelerated investment in homeland security. Magal, a maker of outdoor perimeter protection systems, is considered one of the leaders in its field. Rising concern about global terrorism has led to growing demand for its products. General Electric's (NYSE:GE) acquisition of InVision Technologies (Nasdaq:INVN), a company in the same business as Magal, apparently ignited investors' enthusiasm.
"I'm not alone. I have a partner," said Even-Ezra today. "The timing is obvious. It's no secret that Magal's share price has never reached these levels, and at these prices, it's worthwhile for us to sell some of our shares. In any event, we didn’t sell everything. We still have a very large holding in the company. Besides, we took out a loan to buy IAI's stake in Magal, and we wanted to repay it."
Even-Ezra did not have to sell so many shares to repay the loan, and he admits that the share price was the main motive for the sale. "I really don’t understand the market. I'm an expert in security, not in the capital market, and it's hard to say whether the share has risen as far as it can go."
"Globes": Would you call the price at which you sold high?
Even-Ezra: "It's hard to say. It's a fact that after the report of our sale, the share continued to rise. Yesterday's rise was on a very high volume of shares, which means that that there is great interest. It should be remembered that Magal was traded far below its value, as we were constantly saying. It has now risen to its value and even a little more."
Magal is traded at $25 per share, reflecting a market cap of $200 million. Is that very high?
"The current price of $25 is high. I cannot say if it's very high, but it is high."
Will you sell more shares at this price?
"No. I've decided not to sell any more shares."
Published by Globes [online] - www.globes.co.il - on April 7, 2004