A month after Carmanah Technologies Corporation (TSX: CMH) announced that it would not acquire Israel's Lightech Inc. and sued the company in the Supreme Court of British Colombia, Lightech has countersued Carmanah in the Tel Aviv District Court for an alleged breach of the terminated merger agreement between Lightech and Carmanah. Lightech is seeking $6 million in damages.
The cancelled merger agreement is one of the more unusual stories of late, partly because the agreement was signed and approved by Carmanah's board of directors. Carmanah develops solar lighting and power systems for industrial applications, and has a market cap of C$25 million.
Lightech develops energy management components for lighting units of various kinds. Lightech chairman and CEO David Schreiber founded the company in 1992. It posted a net profit of $800,000 on $10.6 million revenue in 2010.
In September 2010, Carmanah announced its intention to acquire Lightech for $18.5 million, and made a $312,000 down payment, and deposited a similar amount in an escrow account, for a total of $625,000. During the negotiations, Carmanah promised to raise $15 million needed for the acquisition through a bond offering. When it was unable to raise the money, it withdrew the acquisition offer, and did not transfer the money in escrow. Earlier this month, Carmanah sued Lightech in the Supreme Court of British Colombia, demanding the return of the down payment and escrow deposit.
Sources close to the case say that there are no grounds for Carmanah's lawsuit because it is demanding money that it never paid, specifically the escrow deposit. The sources add that an Israeli, not Canadian, court should have jurisdiction to hear the case.
Carmanah CEO Ted Lattimore said, “It is disappointing that Lightech has chosen to respond in this way to the proper termination of the merger agreement. Carmanah has always acted in good faith and was within its rights to terminate the merger agreement." The company added that it will review Lightech’s claim when it is served.
Published by Globes [online], Israel business news - www.globes-online.com - on January 31, 2011
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