First Israel Mezzanine Investors Fund (FIMI), run by CEO Ishay Davidi, has bought another 4% of Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT), two days after acquiring 4%, and now owns 18.5% of the company. This is almost the size of the stake of Gilat's largest shareholder, York Capital Management. Although FIMI, unlike York, does not have a director on Gilat's board, it is effectively a controlling shareholder in the company.
After the purchase of Gilat shares earlier this week, FIMI received approaches from US funds to buy their shares in the company. Yesterday, FIMI bought 1.6 million Gilat shares for $7.85 million, at an average price of $4.90 per share, during trading on Nasdaq. FIMI now owns 7.7 million Gilat shares, which it bought at an average price of $4.10 per share.
FIMI is very probably not finished buying Gilat shares, and it will presumably own more of the company in the future.
As for York, a financial investment firm, it is unclear whether it will decide to sell its Gilat shares to FIMI, or if it will remain as a financial investor in Gilat alongside FIMI. York declined to comment today about the future of its investment in the company.
York acquired its stake in Gilat in June 2005, when it bought the company's $71.4 million debt to Bank Hapoalim (TASE: POLI) and converted it into shares in September 2006. The conversion was made at a share price 35% above the current share price. York subsequently sold part of its stake, including $20 million worth of shares at $8.50 per share (70% above the current share price) as part of Gilat's secondary offering in late 2006.
Yesterday, Gilat reported revenue and operating profit growth for the third quarter of 2012. Revenue rose 6.1% to $89 million for the third quarter from $83.9 million for the corresponding quarter of 2011. GAAP-based operating profit rose to $3.2 million for the third quarter from $1.9 million for the corresponding quarter, and non-GAAP operating profit rose to $5.7 million from $4.3 million. However, GAAP-based net profit fell to $3.3 million ($0.08 per share) from $4.3 million, although non-GAAP net profit doubled to $5.8 million ($0.13 per share) from net income of $2.3 million.
The improvement in Gilat's results will make York's decision whether to hold onto its stake harder. Until now, it has not benefited from the investment, and it now has a lifebelt. On the other hand, the improved results and FIMI's investment may bring about a turnaround at Gilat in the long term.
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2012
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