Elron completes Elbit divestiture

Israeli technology holding company Elron Electronic Industries this month completed the divestiture of its share of Elbit Medical Imaging to Europe Israel, an Israeli real estate investment firm. The divestiture has been complicated, however, by the filing of litigation by two of Elbit’s minority shareholders. The shareholders are claiming that the terms of the sale are slanted in favor of Elron.

Elron announced on May 4 that it had completed the deal to sell its 37% stake in Elbit for $145 million. Under terms of the agreement, Europe Israel has the right to request that Elron invest in a new image-guided therapy joint venture. Elron agreed to the condition in order to win the Israeli government’s approval of the sale (SCAN 4/14/98).

Elbit’s future, and that of its Elscint subsidiary, is now uncertain. Elscint still maintains some medical imaging manufacturing operations, but company observers believe that Europe Israel could be more interested in gaining access to the company’s cash than its technology. Concurrent with the closing of the acquisition, Europe Israel replaced Elscint’s board with directors who, for the most part, represent Israel’s real estate and hotel industry.

In the minority shareholder litigation, two Israeli insurance companies that together own 4.1% of Elbit filed suit claiming that the Europe Israel deal favored Elron over minority shareholders. The plaintiffs have asked an Israeli court for class-action status, and may request that Europe Israel buy out their Elbit stake under the same terms with which it acquired Elron’s position, according to a source close to Elbit.