By Amnon Barzilai
A year after buying Tadiran Communications from
(NYSE:KOR), Shamrock is looking into other Israeli military industries.
Shamrock management, under chief executive Hezi Hermoni, would particularly like to acquire the defense-oriented companies formerly owned by Tadiran, namely the Elisra Electronic Industries group.
When selling Tadiran Comm, Koor retained the Elisra group. Today Elisra controls Koor's defense-related operations. It controls, among others, Tadiran Spectralink, Tadiran Systems, and
Hermoni stressed that Shamrock is also considering acquiring American companies.
The market has changed. Money talks
The strategic decision by Tadiran Communications' owners to expand by acquiring defense-oriented companies was based on two main reasons.
First, Tadiran Communications has a relatively small number of products, confined to tactical military communications. Second, the company is sitting $100 million cash.
Hermoni said that a year ago it was difficult to find an appropriate company up for sale. But the tech crash has changed matters.
"Today, anyone with money can get $3 in value for every dollar spent. Today, money talks," he said.
He said that Tadiran Communications, which operates in a niche market, has annual revenue of $140 million. In recent years its revenues have grown by about 8% a year.
Telecom Florida, an American subsidiary of Tadiran Communications, has doubled its sales annually in the past two years and expects to double sales this year, too, to $40 million.
"Today, our goal is to turn into a leading company and to double and triple sales. A year ago, only Elbit Systems (Nasdaq:ESLTF) could position itself as an investor in Israeli defense industries. Now, we can too," Hermoni said.
Elbit Systems isn't the only player in town
Hermoni said that Shamrock CEO Stanley Gold's interest in acquiring Israeli defense companies is a new phase. Until now, all foreign investors who invested in Israeli defense companies have divested themselves of those assets. Gold, he contends, wants to expand his business ties with Israeli defense companies in part because of Tadiran Communications' accomplishments and partly because of the economic potential of this sector in Israel.
Shamrock's decision to try to acquire Elisra is not only strategic but also tactical. It is meant to show that Elbit Systems, which in the past expressed interest in Elisra, is not the only player in town these days.
Elbit Systems is composed of a group that posts turnover of more than $700 million a year. The purchase of the Elisra group, which has a turnover of about $300 million annually, would turn it into a billion-dollar company. Tadiran Communications, by purchasing Elisra, could expect to post annual revenues of about half a billion dollars.