Gilat: Free Money?

Aaron Katsman
www.IsraelNewsletter.com

First things first. A big thank you to fellow IsraelNewsletter colleague Doug Goldstein, for taking out the entire IsraelNewsletter team(with spouses), to a really nice restaurant last night, and springing for the check. Giddy up.

Much has been made over the last few days over last weekend’s FT article about Gilat Satellite Networks(GILT) and potential suitors. The article said that the company could fetch upwards of $500 million in a deal. That puts it about 15% above it’s current market value. I would expect a deal to get done and I wouldn’t be surprised if it was for even more than the predicted $500 million.

Gilat’s business is doing well. Revenues for Q2 ’07 were at a 5-year high. Net income grew strongly, and they continue to sign both extensions and new deals. Yesterday they signed an expansion deal with Russian telecommunications provider North-West Telecom. North-West Telecom is expanding its Gilat SkyEdge satellite network to bring telephony and broadband Internet services to a growing number of remote communities in northwest Russia. The network expansion will serve many more sites in the Murmansk, Karelia, Komi and Vologda regions. Heck, if they do a deal in Kamchatka, they would win in RISK.

The company has rejected offers in the past at lower valuations, and I would expect them to hold out for a higher premium than is currently being mentioned. At $10.90 a share, either through a takeover or growing the business, the stock looks cheap.

Please see our Disclaimer HERE.

Disclosure: Author has no holdings in any stock mentioned.

Like what you see? Sign up to receive daily updates from IsraelNewsletter here

Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.