Gilat Satellite Networks has finally settled its spat with the private equity consortium that launched a failed bid to buy the company in early 2008.
Under the settlement agreement, four private equity funds, Mivtach Shamir Holdings, LR Group, Gores…
Gilat Satellite Networks has finally settled its spat with the private equity consortium that launched a failed bid to buy the company in early 2008.
Under the settlement agreement, four private equity funds, Mivtach Shamir Holdings, LR Group, Gores Capital Partners II and DGB Investments, will pay Gilat an aggregate of approximately US$20m in return for the Israeli satellite operator terminating all court proceedings against them. Over half the US$20m is to be paid by October 1, 2010 with the remainder to be paid in annual instalments ending in October 2013.
Gilat filed lawsuits against each of the sponsors back in November 2008 after the definitive merger agreement that was signed by the two parties in March was subsequently cancelled by Gilat in August.
Galactic Holding, the PE firms’ buyout vehicle, initially made an US$11.50 per share offer for Gilat in March, valuing the satellite services provider at US$475m. However, with the company’s share price and therefore its market capitalisation declining significantly during the summer, Galactic seemingly got cold feet. Gilat claims that it received several verbal offers from the consortium during this period that were substantially different from the original agreement.
In early August, the consortium notified Gilat that it was investigating whether the company had fulfilled all conditions of the merger agreement. Gilat maintained that it had done so and issued the sponsors with a 72 hour ultimatum on August 25 for Galactic to complete the purchase at the initially agreed price of US$475m. Having failed to do so, Gilat terminated the agreement.
Under the terms of the deal, the two parties agreed to a breakup fee of US$47.3m, to be paid on or before September 10 2008. With the both sides accusing the other of breaching the terms of the agreement, Gilat filed legal proceedings in November.
Commenting on the resolution to the dispute, Gilat’s CEO and chairman Amiram Levinberg said: “With this legal dispute behind us, we can focus our full management attention on implementing our strategy and on our ongoing business.”
Gilat recently announced its second quarter 2010 results, reporting a slight year-on-year fall in revenues from US$56m in Q2 2009 to US$51.8m in 2010. As a result of this decline, net loss for the quarter rose by US$100,000 to US$1.3m.
Despite this fall, Gilat remained positive about its full year performance with Levinberg stating: “Q2 was highlighted by the completion of our acquisition of RaySat Antenna Systems and the signing of a definitive agreement to acquire the antenna research and design center in Bulgaria. These acquisitions are part of our focus on the defense and military markets.
“In the second quarter we were able to increase our cash, and our bookings grew sequentially compared to Q1 2010 and to the comparable quarter of 2009, which leads us to be cautiously optimistic for the second half of the year.”
