Zisser Trying to Float Elbit Medical

Merger with shell company could allow backdoor entry to stock market.

Given the uncertainty that continues to shake the marketplace, Elbit Imaging is seeking alternative financing options for its subsidiary Elbit Medical. One possibility is to merge with a stock market shell and later to issue stock, but though simple in concept, it's proving hard to do.

Ofer Vaknin

Originally the group, controlled by real estate magnate Moti Zisser, had planned to float Elbit Medical. The group had thought to achieve a market value of $250 million for the company, which would raise $50 million to $60 million from selling shares. But feelers sent to the market found only a lukewarm response, even after the company's owners agreed to reduce its valuation for the public offering as low as $140 million.

Shelving the idea of a public offering, the group is thinking of buying a stock market shell, which would take over Elbit Medical's operations. That would get the company onto the stock market through the backdoor and make it easier for the firm to sell shares or bonds in the future.

Elbit Imaging's managers had suggested buying Adumim, a stock market shell that Jewish American businessman Alex Dembitzer recently bought from Emilia Development. But the parties reportedly couldn't agree on terms. Meanwhile, the people at the Elbit group are looking at other shells on the shelf, assuming that an initial public offering is out of the question for the time being.

Elbit Imaging didn't invent the backdoor onto the market. The Hagag construction group recently bought the shell company Asim Investments to get onto the exchange without an IPO. El-Ad Residential, a Yitzhak Tshuva group company, also looked around for a shell company for months and finally settled on a merger with Tamir-Fishman Real Estate Fund.

Elbit Medical is a holding company for medical technology firms. It owns the 71% controlling stake in InSightec and a 32% interest in Gamida Cell.

InSightec is developing systems for noninvasive treatment of tumors using tightly focused ultrasound rays combined with magnetic resonance. The company has invested more than $100 million in research and development. For 2009 InSightec reported sales of $15.6 million and a net loss of $21 million. The year before it generated $10.6 million in sales and lost $23 million.

In its last financing round, in March 2009, InSightec received $15 million from Elbit Imaging at a company valuation of $180 million.

Gamida Cell is developing medical technologies based on stem cells originating in umbilical-cord blood. Since its establishment in 1998 it has accrued an operating loss of $50 million.