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TASE-traded Delek group in talks to buy Formula shares

Formula is planning to raise up to $80m by private placement

The Tel Aviv Stock Exchange-traded Delek group is negotiating the purchase of holdings in the

Formula Systems

(Nasdaq:FORTY) group.

Delek is negotiating a private placement with Formula group chairman Dan Goldstein. In parallel, Delek is negotiating to buy the 5% personally held by the Delek group chairman, Yitzhak Tshuva.

Tshuva personally acquired NIS 55 million worth of shares in Formula. His substantial investment aroused speculation that he might be trying to take over the group.

Danny Goldstein recently confirmed that Formula is in talks to raise up to $80 million by way of private placement with a number of investors. The company's market cap today stands to $300 million.

Formula is a holding company that invests in software houses. One of its most prominent assets is

Magic Software Enterprises

(Nasdaq:MGIC), a dual-listed company currently undergoing reorganization after a particularly bad year. Formula recently delisted ForSoft from Nasdaq and failed in January to buy back the public's shares in Mashov Computers, which it had hoped to delist from the TASE.

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Lior Kagan adds:

After failing to acquire the 95% interest in Mashov Computers that would enable it to delist the company, Formula has consolidated a new plan for the company.

Today Mashov announced that it will be requesting permission at the next general assembly of shareholders to distribute its 30% holdings in Magic Software and 84.7% in TASE-traded Makor Haformika as dividends. Mashov just acquired control over Makor last week.

Mashov will need the approval of at least 50% of its shareholders for the move. Assuming it receives approval, Mashov will be distributing 0.347 Magic share per each Mashov share, and 0.422 Makor share per each Mashov share.

The dividend will be liable to 25% tax. Mashov will retain 25% of the dividend due to each shareholder, for transfer to the tax authority.

Mashov also holds 26% of the online-translation startup Babylon, 5.2% of the Hebrew portal Walla, and 7% of

Paradigm Geophysical

(Nasdaq:PGEO). It also owns 15% of the Internet company U-Call-Net.

The rationale behind the distribution may be to prevent the Formula group from encompassing two holding companies- Formula itself and Mashov.

After the failure to repurchase enough of the public's holdings in Mashov in order to delist the company, Formula chairman Dan Goldstein said Formula was unlikely to issue a second tender offer.