Gilat, Comtech agreement in jeopardy
September 2, 2020
Israel-based Gilat Satellite Networks has reported Q2 revenues of $38.3 million – down 36 per cent on the same period last year.
The company also confirmed that the purchase of Gilat by Comtech Telecommunications remains at considerable risk. Gilat and Comtech are involved in litigation against each other.
The purchase was originally priced at $50 million back in November last year. In May 2020 Gilat reduced its price to $38 million. But then came news of the legal spat. A trial between the two positions is due in October.
Gilat’s Interim CEO Adi Sfadia said orders were postponed or delayed but that in recent weeks its markets have shown signs recovery.
“Gilat began to see and are continuing to see a recovery in most of our areas of operations which is demonstrated by a significant increase in pipeline opportunities,” Sfadia said in a statement. “We believe that as a result of these trends, coupled with the cost reduction initiatives we have executed and are continuing to execute, the 2H/2020 will be meaningfully better than the first half for Gilat.”
As to the legal problems, the company stated: “Comtech filed a complaint against Gilat in the Delaware Court of Chancery seeking declaratory judgments that certain actions, if taken by Gilat in connection with Russia regulatory approval would breach Gilat’s obligations under the Merger Agreement and that Gilat has suffered a Material Adverse Effect, as defined in the Merger Agreement, as a result of the COVID-19 pandemic. As a consequence, Comtech contends that it is not required to consummate the merger.”
“Gilat strongly rejects all such allegations, and on July 21, 2020, Gilat filed a complaint against Comtech in the Delaware Court of Chancery, seeking a Court order requiring Comtech to specifically perform its obligations under the merger agreement, including using its reasonable best efforts to obtain regulatory approval as soon as practicable (as well as seeking all other relief deemed proper, including damages). The Complaint also seeks a declaratory judgment that, if Russian regulatory approval is not obtained by the termination date of the merger agreement, satisfaction of the Russian regulatory condition be excused, and a declaratory judgment that Gilat has not suffered a “Material Adverse Effect”. Trial is scheduled for early October 2020,” stated Gilat.
As to the other key Gilat financials, Gross Profit for the three months ending June 30th was $9.58 million ($21.985 million in the same period last year). Its operating income moved from a positive position (pre-tax) of $4.887 million to a loss of $3.454 million.