Emblaze in talks to sell Formula stake

The buyer is apparently Asseco of Poland. It is unclear whether Emblaze founder Eli Reifman will benefit from the deal.

Emblaze Ltd. (LSE: BLZ) today notified the London Stock Exchange that it is in "advanced negotiations for the sale of its holdings in Formula Systems Ltd. (Nasdaq: FORTY; TASE: FORT)." The company did not disclose the name of the other party.

It's exactly four years since the last time headlines appeared on the business pages about the transfer of control in computing group Formula Systems. Four years have passed, and it seems as though nothing has changed, except for one thing: Dan Goldstein, the name that more than any other was associated with the group, is no longer there, after he sold his stake to the Emblaze group and left the company he founded, after 25 years of activity.

Now the company is about to change hands again. In the next few days, Emblaze is expected on the sale of the controlling interest, 49% of the shares in Formula, to Polish computing services provider Asseco Poland SA (WSE: ACP) for $140 million (about NIS 530 million), representing a 52% premium on the share's closing price yesterday.

The price for the company in the deal is 33% higher than the price Emblaze paid to buy control from Goldstein in 2006. Altogether, Emblaze has expended some $97 million on buying Formula shares over the years.

Formula today is far from the scope of the computing group's activity at the beginning of the decade. Today, the company, headed by Guy Bernstein, has one main holding: just over 50% of computing services company Matrix IT Ltd. (TASE:MTRX), traded on the Tel Aviv Stock Exchange at a market cap of NIS 1.16 billion.

Apart from that, Formula holds two other software companies: Magic Software Enterprises Ltd. (Nasdaq: MGIC; TASE: MGIC) (62.5%) and Sapiens International NV (Nasdaq: SPNS; TASE: SPNS) (70%). The activity of both is much smaller than that of Matrix.

Emblaze has been in negotiations to sell Formula or Matrix itself several times in recent years, but these came to nothing. This time, it appears that the price is attractive enough for the deal to go ahead.

The most interesting question about the deal concerns Eli Reifman, a founder of Emblaze, and the person most closely identified with the company. Reifman is currently under house arrest following his refusal to comply with a court ruling of July 2009 that he should transfer his shares in Emblaze to the special manager of his assets, Adv. Eitan Erez, for the benefit of his creditors. Debt claims have been filed against Reifman to the tune of NIS 340 million.

If Reifman holds the shares, he should make a tidy sum out of the sale of Formula, enabling him to clear part of his debt, in the event that Emblaze distributes a fat dividend.

On the other hand, Reifman could turn out to be the big loser from the current deal. It is believed that part of the deal will be an examination of the identity of the shareholders in Emblaze, and Reifman, who according to the company’s financial statements owns 15% of Emblaze but who claims that he does not control these shares, might not see a cent from the most successful deal ever done by the company he founded.

Emblaze's share price soared 24.1% at the opening in London today to ₤0.515, giving a market cap of ₤46.3 million. Formula's share price rose 7.9% in early trading on the TASE today to NIS 55.63, giving a market cap of NIS 702 million, after closing at $13.76 on Nasdaq yesterday,.

Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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