from the November 2015 issue

Bruker buys Jordan Valley Semiconductors for $53m.

Israel's Jordan Valley Semiconductors provides measuring solutions for controlling microelectronics production.

Veteran company Jordan Valley Semiconductors, which provides measuring solutions for controlling production processes in the microelectronics industry, has been sold to US company Bruker Corp. for $53 million, less than previous valuations for the company. The deal includes a $30 million sale price, plus the balance of Jordan Valley Semiconductors' cash, as well as $15 million in contingent payments, subject to meeting milestones pertaining to gross profit in 2016-2017.

Elron Electronic Industries Ltd. (TASE: ELRN), which holds 19% of Jordan Valley Semiconductors' shares, today reported to the TASE that it would receive $12 million immediately in the deal (greater than its relative share in the sale, because it holds preferred shares), $1.3 million of which will be deposited in a trust fund for 30 months in order to secure indemnification obligations to the buyer. Elron is likely to receive $2 million more in the future. Other shareholders in Jordan Valley Semiconductors include Clal Industries, Intel Capital, and the company founders.

According to Elron's 2014 financial statements, $35 million has been invested in Jordan Valley Semiconductors to date (including $8.1 million by Elron), meaning that if the milestones are not met, the amount paid for the company will be less than the amount invested in it. Bruker's Nasdaq market cap is $2.9 billion.

Bruker, whose main business is manufacturing and marketing advanced equipment for the life sciences, has 6,000 employees. As a result of the payment it is receiving immediately, Elron will post an estimated $3 million net profit in the third quarter, and the company says it is likely to also recognize an additional profit for its potential share in the contingent proceeds. Controlled by Discount Investment Corporation (TASE: DISI), Elron is a technology and life sciences holding company with a NIS 496 million market cap. Its share price shot up 4.4% in today's trading.

Elron recently sold its holdings in Kyma Medical Technologies for $35 million, and is expected to post a $7 million net profit in the third quarter on that deal.

Jordan Valley Semiconductors was founded 20 years ago by CEO Isaac Mazor. The company develops, manufactures, and supplies quality control and measurement (metrology) systems for production lines in chip plants. The technologies used in the company's testing systems make it possible to test the thickness, density, stress, and chemical composition of thin layers making up the integrated semiconductor-based components. Jordan Valley Semiconductors' 2014 revenue totaled $22 million, down 16%, compared with 2013, when its revenue also declined 4.7%, in comparison with the preceding year. Elron posted a $1.4 million loss in its 2014 financial statements as a result of the drop in Jordan Valley Semiconductors' fair value.

As of December 31, 2014, the value of Elron's investment in Jordan Valley Semiconductors was $9 million, based on an external valuation of the company. For the sake of comparison, Elron's holdings in Jordan Valley Semiconductors were valuated at $13.5 million in 2010, when Jordan Valley Semiconductors' value was estimated at $53 million. This is not the first time that the company was mentioned as a candidate for potential acquisition. Five years ago, Elron classified its holdings in the company under the "assets available for sale" item.

Negotiations for the sale of Jordan Valley Semiconductors took place in 2012, with the potential buyer on that occasion being Israeli company Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI). According to unconfirmed reports at the time, the company value for the deal being discussed by the parties was $50-60 million. In a presentation for investors at that time, the value of Elron's stake in Jordan Valley Semiconductors was estimated at $15-20 million, reflecting an even more generous value of $75-100 million for Jordan Valley Semiconductors.

Reprinted from the Israel High-Tech & Investment Report November 2015

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