On Track Innovations faces hostile takeover bid

C. Silk & Sons is now On-Track's largest shareholder, followed by its founder and CEO Oded Bashan.

Contactless smart card solutions developer OTI - On Track Innovations Ltd. (Nasdaq: OTIV; DAX: OT5) faces a takeover fight after C. Silk & Sons notified the company that it has acquired a 10.4% stake in the company. C. Silk said that it plans to replace its board of directors and CEO, and change its bonus structure for middle managers, and possibly the sale of the company or its assets if the board should be uncooperative.

C. Silk & Sons is now On-Track's largest shareholders, followed by its founder and CEO Oded Bashan, with a 6.7% stake.

Massachusetts-based C. Silk & Sons operates on the cash-rich fallen angel (CRFA) model. The company's homepage says, "I, Marc Silk, specialize in discovering, thoroughly researching and building positions at a price that attempts to limit downside risk."

On Track fits this definition perfectly. The company's share price has been halved since January to $1.62 on Nasdaq and €1.14 in Frankfurt on Friday, giving a market cap of $51 million. The company raised $17 million at $3 per share in a secondary offering earlier this year, almost double the current share price, giving C. Silk reason enough to launch a hostile takeover attempt.

In a filing with the US Securities and Exchange Commission (SEC), C. Silk stated that it began buying On Track shares in late 2006, and its stake at the time was worth $8.3 million. On Track's share was traded at $7 in late 2006. The stake is currently worth $5.4 million, indicating a 35% loss on investment. This loss apparently prompted C. Silk's shareholder activism.

On Track has not yet responded to C. Silk's assault.

In a separate development, last week, On Track announced that Russian carrier MTS selected the company's COPNI mobile payment solution for its near field communication projects. The company did not disclose the size of the deal. MTS will launch the program with Lukoil gas stations. Customers will use their mobile phones to buy fuel.

Published by Globes [online], Israel business news - www.globes-online.com - on October 16, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018