Malrag - Engineering and Construction Ltd. (TASE:MLRG) controlling shareholder Michael Hirshberg has signed a letter of intent to sell 37.4% of the company, half his stake, at NIS 13.50 per share, reflecting a company value of NIS 180 million. The price reflects an 80% premium on Malrag's market cap of NIS 100 million, based on yesterday's closing price. The name of the buyer was not disclosed.
Malrag's share rose 10% by midday today in response to the notice to the TASE.
If the deal is closed Hirshberg and the buyer will own equal stakes in Malrag's controlling core. The parties seek to join forces and connections in order to expand Malrag's participation in BOT and PFI tenders in Israeli and overseas and to serve as an environmentally friendly subcontractor in domestic and international projects.
In late 2007, Hirshberg signed an agreement to buy the 37% stake of his partner, Joseph Melamed, in Malrag at a company value of NIS 165 million, because of a dispute between the two men. The stake was equal to Hirshberg's stake at the time. The buy me-buy you deal has not yet been closed, and Melamed's shares are currently held in trust by an attorney.
Hirshberg has paid Melamed an initial NIS 20 million for the shares, and Melamed and his sons quit their jobs in the company. Hirshberg needs another NIS 47 million to close the deal, and will reportedly finance the purchase from shareholders' equity and a bank loan. Hirshberg controls 74% of Malrag for the purposes of voting rights, dividends, and management, even though Melamad's shares have not yet been transferred to him.
Hirshberg and Melamed founded Malrag in 1990, and floated 25% of the company on the TASE in 2005. The company is one of Israel's top five contractors for transmissions projects.
Published by Globes [online], Israel business news - www.globes-online.com - on April 24, 2008
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