The central district court of Israel has fully dismissed the lawsuit brought by eight shareholders of Gilat Satellite Networks against the company in the wake of the failed US$475m takeover by a private equity consortium in 2008. The shareholders, a mix…
The central district court of Israel has fully dismissed the lawsuit brought by eight shareholders of Gilat Satellite Networks against the company in the wake of the failed US$475m takeover by a private equity consortium in 2008.
The shareholders, a mix of Israeli companies and individuals, had sought damages worth approximately US$12.4m following Gilat’s termination of the March 2008 merger agreement with four private equity funds, Mivtach Shamir Holdings, LR Group, Gores Capital Partners II and DGB Investments.
The plaintiffs claimed damages based on the amounts they would have been paid upon closure of the merger agreement.
Having made its US$11.50 per share offer for Gilat in March 2008, the PE firms’ buyout vehicle Galactic Holding allegedly sought to renegotiate the purchase price after Gilat’s market capitalisation declined significantly during the summer.
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 25 August for Galactic to complete the purchase at the initially agreed price. 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 both sides accusing the other of breaching the terms of the agreement, Gilat filed legal proceedings against Galactic for non-payment of the breakup fee in November.
Galactic eventually reached an out of court settlement with Gilat in September 2010 that saw it pay approximately US$20m in return for the latter dropping its claim.
Concurrent to this legal spat was the eight shareholders’ lawsuit against Gilat for terminating the merger agreement. Having initially launched legal proceedings in October 2008, the plaintiffs withdrew their claim in July 2009 at the recommendation of the court, which questioned the basis for the lawsuit.
The shareholders then refiled the suit in November 2009 and it has taken until October 2013 for the central district court to reach a decision.
The court dismissed the lawsuit in its entirety and awarded Gilat with legal expenses. The plaintiffs have the right, within the next 45 days, to appeal to the Supreme Court in an attempt to change this ruling.
