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Gilat may sue if private equity deal fails

The planned takeover of Gilat Satellite could become the latest private equity deal to fail if the the Israeli satellite communications company can not persuade its disparate group of investors to close a deal at or near the price they agreed upon in March.

Unless a deal is struck by Thursday evening in New York – which people close to the companies said on Wednesday was unlikely – Gilat’s board of directors will meet on Friday or Sunday to decide whether to continue negotiations or sue the investors who agreed to take the company private for $475m, or $11.40 per share.

If Gilat opts to go to court, as many other spurned takeover targets have in the past year, it is likely to file a suit in Israel in mid September. But it is also considering litigation in the US, according to people close to the company.

The week of September 8 also marks the scheduled trial between Huntsman, a US chemicals company, and Hexion, the Apollo Management-backed company that has argued its $6.5bn agreement to buy Huntsman is no longer valid. Hexion says Huntsman’s business has suffered a “material adverse change” that should scuttle the contract, a charge Huntsman, which is suing for more than $3bn, denies.

Huntsman’s deal was signed last July, when air remained in the buy-out boom’s bubble. Gilat’s investors agreed to their buy-out months after the credit crunch began. The group is led by US private equity firm Gores Group and includes Israeli holding company Mivtach Shamir and DGB Investments, a company affiliated with Doug Bergeron, the Canadian investor and chief executive of VeriFone.

Gilat told its suitors early this month that it had satisfied the conditions necessary to complete its takeover. The investors then responded with questions over Gilat’s performance, its business in Colombia, and whether various issues could affect the deal’s financing. The investors are now proposing to either buy the company at a significantly cheaper price or keep it public.

The consortium has agreed to a break-up fee of 10 per cent of the deal’s value, significantly more than the typical 2 to 3 per cent.

The deal is not subject to financing conditions, and its “material adverse effect” clause largely covers situations in which Gilat’s business is disproportionately damaged compared to its peers’, a condition that could be difficult to prove.

Источник: Financial Times

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