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Shaul Elovitch Considers Putting Satellite Company Spacecom On the Block : Asking Price Only $570 Million

Shaul Elovitch indicates he may sell Israeli communications satellite company Spacecom if he gets his price.

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Shaul Elovitch Photo Eyal Itzhar

Shaul Elovitch/ Photo Eyal Itzhar,  Globes

Shaul Elovitch is the founder and Chairman of the diversified, privately held, communications company Eurocom Group. The Eurocom Group controls controls Israeli telecoms company Bezeq Israeli Telecommunication Co. Ltd.(TASE: BEZQ), and a number of other communications interests. As well it undertakes investment management and real estate activities.

Two of Elovitch’s sons work with him, Yosi who is a Eurocom Director and Or who currently acts as the CEO of Eurocom.

Or Elovitch is also Chairman of Eurocom’s 64.5% held subsidiary Spacecom Satellite Communications Ltd. (TASE:SCC) , the owner and operator of Israel’s Amos communication satellites.  Spacecom has a float of around 27% of the approximately 20.5 million shares outstanding after the Eurocom controlling interest and other insider holdings are cancelled out.

Spacecom provides satellite communication services through its satellites Amos 2, Amos 3 and Amos 5. Earlier in the year the company launched a new satellite Amos 4, and the plan is for it to provide satellite communication services to Russia, East Asia and the Middle East. It is also planning to launch another new satellite, Amos 6, to upgrade its level of services and replace Amos 2 before 2016, by when it may be getting a just a little bit long in the tooth.

Spacecom’s shares currently trade at around NIS 50 (about US$14.29) per share, giving the company a total market capitalization for its equity of about NIS 1billion (about US$285 million). The company went public in 2005 and in recent years the shares have been quite volatile, peaking within the last five years at over NIS 75 (about US$21.40) per share in 2010, yet having traded as low as NIS 30 shekels (about US$8.57) per share just a year earlier in 2009.

There currently appears to be quite a lot of debt in the balance sheet too, about NIS 1.45 billion (about US$414 million) at September 30th, 2013, compared to a book equity of only NIS 489 million (about US$140 million), or about half its current market value.

AMOS-5_Satellite_--_with_star_backgroundAMOS 5 Satellite

With nine months revenues of NIS256 million (about US$73 million) in the period to September 30th, 2013 the company seems on course to beat last years annual total of NIS 321 million (about US$92 million) in revenues for the full calendar, and fiscal, year. This year it is profitable again too, having taken a substantial write down in the fourth quarter of last year against malfunctioning engines in one of its satellites, which put it into loss for the year.

Net income earned for the year to date is NIS24.9 million (about US$7.1 million) or NIS1.20 (about US$0.34) per share on about 20.5 million total shares outstanding. Let’s say the company makes, and I am just calculating arithmetically pro rata here without specific knowledge of its seasonality, or of the company’s own forward guidance, NIS 1.60 (about US$0.46) per share for the full year.

With that assumption the company then is currently trading at an implied current P/E of just over 31 times earnings.

According to a filing on Friday with the Tel Aviv Stock Exchange the company has now formally hired an investment adviser, J.P. Morgan to advise it about selling the company in response to interest expressed by outside parties.

Israeli newspaper reports today also indicate that Shaul Elovitch has hinted he would like to cash in for a bid of about NIS2 billion (about US$570 million) for the whole company, control of which he can deliver with his 64.5%.

A price of NIS2 billion, or US$ 570 million, would actually be exactly double the current market value therefore at NIS100 (about US$28.58) per share, and a little over four times the book value of its equity. It would also, if achieved, represent a going in P/E for an acquirer of over 62 times current earnings. With debt in the balance sheet of nearly NIS1.5 billion (about US$429 million) this would therefore also represent a total gross enterprise value of NIS3.5 billion (about US$1 billion).

No wonder the company also said in its filing with the Tel Aviv Stock Exchange that “The process of review is in the earliest stages and there is no certainty that a deal will be carried out.”

Even with a strong backlog of orders, as Spacecom indicates it may have, there seems to some remarkably optimistic numbers being thrown around here, perhaps just for public consumption at this point.

About Shaul Elovitch

Shaul Elovitch, 64, was born in Poland in 1949 and came to the new State of Israel when he was two years old.

After completing his military service he studied law for a while, only to drop out and join his father’s small business installing intercom systems and television antennas, and marketing imported telephones.

He later acquired Eurocom, whose products he had been distributing and eventually became distributor for some important global manufacturers, including Panasonic and Nokia, leading to his business then rapidly expanding.

By 2010 he had acquired the national telephone company Bezeq, and his satellite company Spacecom was also doing well. Today Eurocom is one of Israel’s most important private investment holding groups.



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