FIMI Opportunity Funds, controlled by Ishay Davidi, is considering a structural change in Ormat. The proposed change consists of a merger between Ormat Industries Ltd. (TASE: ORMT), which has a $800 million market cap, and its subsidiary, Ormat Technologies Inc. (NYSE: ORA), in which Ormat Industries owns a 60% stake. Ormat Technologies, whose market cap is $1.27 billion, operates in the field of geothermal energy, and accounts for most of its parent company’s business.
The main point of the measure is elimination of the holding company separating the shareholders from business activity, thereby saving costs resulting from maintaining two public companies.
Under the proposed merger, Ormat Technologies will acquire the shareholders’ holdings in Ormat Industries in exchange for an allocation of shares in Ormat Technologies, at an exchange ratio to be determined by the parties. The result will be the delisting of Ormat Industries from the Tel Aviv Stock Exchange (TASE) – another blow to the local stock exchange, which has suffered in recent years from low turnovers and a fall in the number of listed companies.
Ormat Industries’ report to the TASE stated, “The company board of directors has appointed a special committee, which is considering the terms for the structural change, including the exchange ratio, with the help of external advisors. The board of Ormat Technologies has also appointed a special committee for this purpose.”
The announcement also said that at this stage, the companies have not yet come to any agreement whatsoever on the proposed deal, particularly with respect to the share swap in it. Neither company has approved the deal, the completion of which is by no means certain. The company’s report also mentions that any potential deal is subject to obtaining the necessary approvals, including regulatory ones, and approval by the shareholders of both companies.
Ormat Industries is controlled by FIMI (24.2%) and the Bronicki family (15.1%), which founded Ormat in 1965. Norstar Holdings Inc. (TASE: NSTR), controlled by Chaim Katzman and Dori Segal, which previously attempted a hostile takeover of the ompany, opposed by the Bronicki family, currently holds 7.7% of the company.
Ormat Technologies, managed by CEO Isaac Angel, who replaced Yehudit Bronicki in early July, is active in the products segment. The company is building power stations for its clients, and it also owns its own power stations. The company’s revenue totaled $128 million in the second quarter, down 16.4%, compared with the corresponding quarter last year. Ormat Technologies’ revenue since the beginning of the year was $270 million, about the same as in the corresponding period last year, and its January-June net profit totaled $31 million, 53% more than in the corresponding period in 2013.
Published by Globes [online], Israel business news – www.globes-online.com