Israeli Startup Mobileye Selling 25% Stake for $400m to Group of Blue-chip Investors

Deal makes automotive-technology company most valuable Israeli startup ever.

Just weeks after Waze was sold to Google for more than $1 billion comes another giant high-tech deal involving an Israeli startup: Mobileye, whose technology helps drivers avoid accidents, announced on Monday the sale of a 25% stake in the company to a group of blue-chip investors, for $400 million.

The sale values the company at more than $1.5 billion before the money, making it the biggest-ever private equity investment ever in Israel's high-tech sector. The investors are money management firms BlackRock, Fidelity Management and Wellington Management; a Chinese investment firm, Sailing Capital; and Enterprise Rent-A-Car, the closely held rent-a- car company.

“This successful transaction is a testament to the strength of our business and the company’s future prospects. We are excited to have such world-class investors joining forces with us as we move into the next growth phase of our company,” said Ziv Aviram, the 14-year-old company's CEO and cofounder.

Mobileye, which is headquartered in The Netherlands, said it expected to complete the agreement, which was arranged by Goldman Sachs and Morgan Stanley, in August. The investment comes ahead of an initial public offering sometime in the next 18 months on Wall Street.

The company's advanced driver assistance technology alerts driver to an imminent collision or unintentional drifting into another lane. It can provide braking to prevent accidents. Mobileye's technology is factory-installed by several automakers, including General Motors, BMW and Volvo, and the company says 19 car manufactures are on-board. The technology is also offered as an aftermarket product.

The company, which operates what it says is the world's largest machine vision development center, in Jerusalem's Har Hotzvim technology park, employing some 200 engineers, hopes to develop a self-driving car.

Coming close on the heel of the Waze deal, the Mobileye news will likely lure more venture capital into Israeli high-tech startups.

Mobileye was founded in 1999 by Aviram, together with Amnon Shashua. Each now owns a 10% stake in the company (although they are expected to sell part of their shares in the current deal). It has long been regarded a pioneer in the area of accident prevention using an electronic eye.

Mobileye is believed to have annual revenues of around $50 million, but the company became profitable only in 2012, with earnings of a few million dollars.

The company claims to control about 80% of the market for driver-assistance technology, which is used mainly in luxury cars. The future looks brighter, as regulators in the United States and Europe begin demanding the technology be installed in all vehicles.

Google has been working on a driverless car, but its technology is more sophisticated and expensive than Mobileye's.

EuroNCAP, an intergovernmental organization that conducts vehicle safety test and sets safety standards, wants half of all cars to have automatic braking systems to ensure minimum distances between cars on the road by 2014. Israel began offering tax breaks this year of up to NIS 2,250 to drivers who install the systems on their cars.

Between 2007 and 2012, Mobileye raised $160 million in several financing rounds, at a company valuation that increased from $500 million to $750 million. One of its biggest shareholders is Bank Leumi, which first invested in the company in 2008, via its Leumi Partners unit.

Leumi Partners has put some $60 million into Mobileye to date, buying out a foreign shareholder, joining a 2010 financing round and in a transaction around six months ago led by Gil Agmon, controlling shareholder of Delek Automotive. Agmon owns between 6% and 7% of Mobileye personally and through Delek Automotive.

Leumi Partners owns 3.5% of Mobileye, worth between NIS 180 million and NIS 200 million. It will gain NIS 120 million from the latest financing round. Like other Mobileye shareholder, Leumi will sell some of its shares to the new investor group.

"We are talking about an unusual and special deal in which a unique and promising privately controlled company … is selling a block of shares and not control for more money than we have seen in Israel until now," said Leumi Partners CEO Yaron Bloch, adding that the new investors are "funds and professional groups that are among the leaders in the field globally, who see the potential for double-digit returns."

Other big investors in Mobileye include Goldman Sachs, which is expected to sell much of its stake in the current transaction; Colmobil, the Israeli importer of Mercedes Benz, Mitsubishi and Hyundai cars; Lev Leviev, the diamond billionaire and controlling shareholder of Africa Israel Investments; Zadik Bino, whose holdings include the First International Bank of Israel; the telecommunication entrepreneur Ilan Ben-Dov and his Scailex company; and Arik Steinberg, former chairman of Psagot Investment House.

Ofer Vaknin