Ituran Location and Control Ltd. (Nasdaq:ITRN); TASE:ITRN) has lost its case against US private equity fund Leonardo LP. Central District Court Judge Michal Nadav yesterday ruled in Leonardo's favor and ordered Ituran to pay $22.7 million.
Ituran said that it intends to appeal the decision.
In February 2000, Leonardo invested $12 million in Ituran, which allotted it convertible notes that were valid for three years. The notes bore 3.5% annual interest. Leonardo converted notes into shares worth $6.7 million in 2000-02. In 2003, Leonardo sued Ituran, claiming that an invalidating event occurred in February 2002, when the holding of Moked Ituran Ltd., through which the Sheratzky family controls Ituran, fell by over 30%. Under the terms of notes, Ituran was required to notify Leonardo in the event of an invalidating event, and Leonardo had the right to demand the balance of the debt, multiplied by a figure set in the agreement, for a total of $9.6 million.
Leonardo claims that Ituran failed to notify it as required, and that it discovered the event three years later.
In its defense, Ituran said that the claim was baseless, saying that Moked's holding fell for specific technical reasons. Ituran added that it sent Leonardo's the company's financial report for 2002, which stated Moked's holding in the company.
Judge Nadav said that Ituran failed to notify Leonardo of the invalidating event, that Ituran failed to meet its obligations, and violated the provisions of the notes. She ordered Ituran to pay the $9.6 million, plus interest and linkage, as well as NIS 1.2 million in costs for a total of $22.7 million.
Ituran co-CEO Eyal Sheratzky said, "While we are disappointed, we will continue to defend our position. We believe that there are numerous grounds for appeal, and plan to contest the District Court's decision vigorously before the Israeli Supreme Court. Our business remains strong, and while we expect to take a charge on our 2010 financial statements, this court decision will have no bearing on our ongoing operations going forward."
Ituran's share price fell 1.4% on Nasdaq yesterday to $14.20, giving a market cap of $310 million, and fell a further 1.3% in premarket trading today. The share price fell 2.9% by mid-afternoon on the TASE today to NIS 47.20.
Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2011
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