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Friendly takeover / Ishay Davidi raises Retalix stake to 12%
By Shlomi Sheffer

Is Ishay Davidi planning to do to Retalix what he did with Lipman Electronic Engineering? So it would appear.

Over the past 10 days Davidi's fund, First Israel Mezzanine Investors (FIMI), has been buying up Retalix shares and now owns 12% of the company - effectively making Davidi the controlling shareholder. Davidi spent about $35 million on the purchases, at an average price of $15.80 per share - considerably lower than Monday's closing price on Wall Street: $18.20 per share.
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Beyond the exploitation of the share's low price - the result of a profit warning issued by Retalix in early January, it seems that FIMI is considering a turnaround for the company, which has been suffering from management problems in the past two years. Anyone familiar with Davidi knows he has probably been studying Retalix for a while.

A closer look at Retalix's financial reports shows investments of about $120 million in R&D, and this is apparently what attracted Davidi. FIMI can help Retalix bring new products to the market and to expand its sales network to other countries.

Now that FIMI is the largest shareholder, it seems unlikely that Barry Shaked, who owns 5% of Retalix's shares and serves as CEO, president and board chair, will be able to block Davidi's plans. Shaked may not have been privy to Davidi's shopping spree, but it is reasonable to assume that he could have realized that FIMI was behind the recent huge trade volume in Retalix shares. Market sources figure that the Israeli institutional investors that own about 40% of the shares will side with FIMI.

FIMI has already announced its intentions to make changes to the company's board and Shaked will probably be replaced as its chair, although he will most likely remain at the company's helm.

Retalix has not been faring well for the past few years and last month warned of $0.8-$2.8 million in losses for the fourth quarter of 2007, on revenues of $56 million. That quarter ended the year with sales of software and services totaling $222 million, but with dismal net profits of $0.5 million at best, or up to $1.5 million in losses at worst.

Even so, there are market players who believe in the company and its products. Retalix develops software tools for managing retail chains, including supermarkets and gas stations.
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