Elron Electronic moves to sell Elbit

Elbit Medical Imaging parent Elron Electronic Industries announced Feb. 25 that it will sell its 37.3% stake in Elbit to Europe Israel for approximately $145 million. Haifa, Israel-based Elron Electronic is a high-tech holding company involved in defense electronics, communication, semiconductors, networking, software, and information technology. Europe Israel operates in three main areas: hotels, shopping and entertainment centers, and high-tech ventures. The deal is expected to close at the end of this month.

Elron’s effort to sell Elbit comes while Elbit is in negotiations with its subsidiary Elscint for the purchase of Elscint’s remaining shares. In February, Elbit offered Elscint about $100 million (SCAN 3/3/99) for the shares. An independent committee of outside directors formed by Elscint’s board issued a statement March 2 expressing willingness to begin negotiations for the deal.

As it contemplates its own sale, Elbit, also of Haifa, this month announced that it has been served with notice of a second shareholder lawsuit, similar to one filed late last year (SCAN 11/25/98). The second class-action suit is based on a comparable claim filed in November in the name of all holders of Elbit stock warrants since 1994. It claims that since Elbit did not disclose that it was planning to sell the bulk of Elscint’s business before the warrants expired, the plaintiffs were prevented from benefiting from the stock increase that resulted from the sale announcements.

The second suit requests damages for claimants who sold warrants between Aug. 1 and and Aug. 31, 1998 for a lower price than they would have received if Elbit had made its sale negotiations for Elscint known. Elbit rejects the claim and will attempt to have it dropped.