Koor Touts Elisra Elsewhere as Tadiran Deal Falls Through

Ora Coren
Ora Coren
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Ora Coren
Ora Coren

The Koor Industries concern is in negotiations to sell Elisra Electronic Systems to two "outside" corporations at a company value of $100-130 million, after the chances of completing an agreed-upon sale of the company to Tadiran Communications evaporated, according to sources close to the defense companies.

The sources say that Jonathan Kolber and Danny Biran, Koor's CEO and president, respectively, are blaming the collapse of the Elisra-Tadiran deal on Tadiran Communications CEO Hezi Hermoni, who believed that Elisra was worth less than the $120 million that Koor had valued it for the terms of the sale.

Hermoni's opinion on the deal is significant, as he could bring the minority shareholders of Tadiran (institutional investors among them) to ditch the deal despite the position of the controlling figures of Koor and Elbit Systems, which holds 20 percent of Tadiran Communications.

Sources in the market say that one of the groups interested in buying Elisra is also interested in buying the balance of Koor's 18.4 percent stake in Tadiran Communications.

Elbit is also trying to torpedo the process, continued the market sources, because it can then reap the fruits of a company sitting on a cash mountain of $250-300 million. The collapse of the Elisra deal will then negate Koor's commitment to sell its remaining holdings in Tadiran Communications to Elbit Systems. In this scenario, the battle is being fought between Elbit and Koor, and both have been buying Tadiran's stock on the market to strengthen their positions.

The maneuverings in the defense sector center around a deal signed in December 2004, which would have reconstructed the sector at the hands of Elbit Systems and Koor in three stages. In the first stage - which has since been carried out - Elbit Systems bought 13.8 percent of Tadiran Communications from Koor for $63 million, while Koor bought 5.3 percent of Elbit Systems from Mickey Federmann for $53 million.

The next stage of the deal gets more complicated, because it is a transaction of interested parties, and therefore subject to strict regulations of shareholder approval. In this second stage, Koor would have completed the sale of its 70 percent holding in Elisra to Tadiran on terms to be agreed upon. This is the deal that has apparently gone up in smoke, and the third stage - in which, after interconnected sales had been completed, Elbit Systems would control Tadiran, which in turn would control Elisra, while Koor sits quietly on the side with just 10 percent of Elbit Systems - is now a moot point.

The current transactions seem a far cry from the 2002 deal in which Koor sold a minority 30 percent stake in Elisra to a subsidiary of Israel Aircraft Industries, based on a company value of $330 million. In 2004, Koor realized that it could not repeat that valuation on the company in a much changed defense sector, hence its offer of sale based on a much reduced company value of only $120 million. But even that has failed to close the deal.



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