Five years after it was first issued on the Tel Aviv Stock Exchange, the manufacturer of communications equipment Telrad Networks is sold at a lower value than its IPO value. Liquid Intelligent Technologies will acquire the Telrad In exchange for NIS 199 million, it is higher than Telrad’s market value before the transaction was reported – NIS 157 million, but as stated, it is lower than the value in an IPO made in 2017 at a value of NIS 340 million “after the money”. In addition to options granted to Telrad employees, the value of the transaction reaches NIS 207 million. The transaction is subject to the approval of Telrad’s shareholders and the receipt of regulatory approvals.
Following the issuance of Telrad at a price of NIS 6.5 per share in May 2017, the share price rose to a peak of NIS 6.7 (market value of NIS 345 million) in July 2017, then dropped to a low of 51 agorot in March 2020, and was recently traded at around 3 Shekels.
Liquid operates in the fields of telecom, data centers, cyber and cloud services in 15 countries in Africa, mainly in the sub-Saharan region. The company was established in 2005 and positions itself as a provider of communications infrastructure across the continent. Founded in 1951, Telrad currently operates in three business segments through a number of subsidiaries: it provides products, solutions and services to communications operators, deals with communications infrastructure, cyber and IT, as well as business process outsourcing, project management and digital mapping services. Liquid will acquire full ownership of Telrad and turn it into a private company.
Today, Telrad’s major shareholders are the Private Equity Fund Fortissimo Which holds 41% of the shares, as well as the Phoenix and Excellence with 6.1% and 2.9%, respectively. Fortissimo, led by Yuval Cohen, invested in Telrad in 2004, and in 2009 increased its holding when it acquired the controlling shares from Koor. In total, Fortissimo invested about $ 20 million in Telrad until the IPO, leading a process of change of focus and recovery. In the IPO, Fortissimo and other shareholders sold shares for NIS 80 million.
Yuval Cohen, Telrad’s chairman and managing partner at the Fortissimo Fund, said: “Telrad is today a growing company, with good profitability over the years and with a large backlog of orders for the coming years. “The connection with Liquid, which is a significant international group, will ensure the company’s expansion in Israel as a significant technological center for the entire group, and its penetration into new markets and customers in the coming years.”
The company’s CEO for the past 3 years is Moti Elmaleh, former CEO of Bezeq International. The company emphasizes that Elmaleh led a reorganization at Telrad and transferred it to growth and profitability, and that the price of the transaction is 108% higher than the company’s value upon taking office. Elmaleh said: “The Liquid Telecom Group expresses confidence in Telrad and the Israeli high-tech industry. The integration with the Liquid Group will enable Telrad’s products and services to bring technological innovation in the three operating segments to the existing international activity in the acquiring group, serving millions of private customers and hundreds of thousands. In the last three years we have worked with the company’s board to improve Telrad’s business and enter the company into new markets and other areas of activity, all driven by innovation and technology, which will form the basis for Telrad’s continued growth together with the opportunities it will develop with the Lycawi Group. In the world. “
In 2021, Telrad’s revenues totaled $ 179 million, a slight decrease of 1.2% compared to revenues in 2020, which is explained by a decrease in revenues from products, solutions and services for communications operators, and an increase in communications infrastructure and business process outsourcing. The decrease in revenues was explained, among other things, by the problems of the global supply chain and the stabilization of the ordering pace of communications operators, after a long period of stockpiling against the background of the spread of the corona crisis. It should be noted that only 3% of Telrad’s revenue in the last two years has come from Africa, which is focused on by the buyer Liquid, while its main market is South America, which accounts for close to a third of revenue.
Operating expenses increased and as a result operating profit shrank by 28.4% to $ 9.6 million, and the bottom line was a net profit of $ 5.5 million attributed to shareholders – down from $ 8.6 million in 2020 but compared to a net loss of $ 34.5 million in 2019. Telrad’s cash balances at the end of 2021 totaled $ 12.2 million.
Telrad was represented in the transaction by Discount Capital and Lincoln International, and attorneys Haim Friedland, Yair Shiloni and Ari Fried of the Gornitzky firm, and Liquid was represented by attorneys Sheerin Herzog, Sharon Gazit and Judy Amidor of the Goldfarb Seligman firm.