Israeli online business news Calcalist reports (Hebrew) that Gilat is in negotiations to acquire Airspan Networks.
The acquisition sum is rumored to be around “few tens of Millions of Dollars” while Airspan is currently traded in the Pink Sheets after voluntarily delisting from Nasdaq and traded for about $4 Millions.
The article mentions a few problems in this rumored acquistion:
- Airspan’s commitments to Oak Investment Partners after their investment in 2006, which drives the price higher than the book value.
- Airspan HQ are in Boca Raton, Florida with development offices in England and Israel, Sales offices around the world. It is not that easy to absorb such an international company.
- In 2008 Airspan had revenues of $70 Millions which resulted in an operational loss of $50 Millions. Alvarion had similar revenues for Q1, 2009 alone.
Gilat is reported to be sitting on a pile of cash, but from a short analysis of the infromation above, I would recommend Gilat to negotiate harder.
Airspan would be a good fit for Gilat as it would extend Gilat’s footprint to terrestial network users thus offering synergy. However, as the article points out, OAK has a preferred position requiring at least $60 million net purchase price before commons get anything. It is however possible that the valuation of premium to the $70 mil revenues might be justified to Gilat because airspan is well positioned to get substantial revenues from the U.S. stimulus programme funded at $7 billion of which a significant part is allocated to wireless broadband to rural and under served areas. Whatever premium to one times sales may offer the commons something.