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Formula Systems announced yesterday it had signed a definitive stock purchase agreement with Matrix IT, an 85.5 percent-owned subsidiary of the company, under which it will sell its subsidiaries - New Applicom, Sintec Advanced Technologies and Sivan Training and Systems - to Matrix for NIS 127 million. The move will lead to the delisting of the subsidiaries and their merger into Matrix.

Formula also plans to make a cash offer for the public's shares in the three companies at a premium of a few percent above equity. Matrix will offer to buy the public's shares in the companies in a share exchange for Matrix shares. Formula then plans to sell the shares it bought off the public to Matrix at the purchase price.

When the move is completed, New Applicom, Sintec and Sivan will become subsidiaries of Matrix and, in effect, become a division of the company. Matrix will then have a payroll of some 2,000 employees and an annual turnover of over NIS 1 billion, creating, what Formula said, would be the largest information technology company in Israel.

Once this is completed, Formula will begin reorganization of its own corporate structure, which will include job cuts.

Formula CEO Danny Goldstein said yesterday that the move was a correct one both from the business and capital market points of view. He said there is no need to keep the companies listed on the stock exchange, since there is no possibility to raise money, while the trade volume of these companies is very low while costs remain high. On the other hand, Goldstein said, the market is looking for large and stable companies offering overall solutions.

Goldstein said the move is expected to save around NIS 10 million a year and will lead to increased revenues due to the establishment of a brand that will benefit from a stronger position in large tenders.