Matrix looks to Wall Street: $2.1 billion merger could pave way for Nasdaq listing
Tel Aviv-35 entry is just the beginning as company eyes international growth.
Matrix, a leading software and IT services company, is moving forward with a merger with its sister company, Magic, in a deal designed to position it for inclusion in Israel’s Tel Aviv-35 Index, boost its U.S. expansion, and potentially pave the way for a Nasdaq listing. The move also has the added benefit of addressing long-standing tensions between Matrix’s longtime CEO, Moti Gutman, and institutional investors over his controversial compensation package, which totaled NIS 23.7 million ($6.5 million) in 2024—nearly NIS 2 million ($547,000) per month.
As first reported by Calcalist, Matrix has signed a memorandum of understanding for a stakeholder transaction to merge with Magic. Both companies operate in overlapping fields and are controlled by Formula Systems, which is managed by Guy Bernstein and ultimately owned by Poland-based Asseco (25.8%). Formula holds 48.2% of Matrix and 46.7% of Magic.
Following the news, investors welcomed the deal, sending Magic’s stock soaring 13.5% on unusually high trading volume—15 times its daily average—while Matrix rose 6.8% on turnover 4.9 times higher than usual. The signal for the surge came a day earlier, after Calcalist leaked details of the merger, causing Magic to jump 8% in New York trading.
To execute the merger—expected to close in Q3 2025—independent committees were formed at both companies, led by Sami Totach, former managing partner at the Viola fund, and angel investor Tal Barnoach. The deal structure, negotiated with the help of Jefferies bank (for Matrix) and ValueBase (for Magic), resulted in a merger ratio of 68.15% to 31.85%, meaning Magic shareholders will own nearly 32% of the combined company.
The merged entity will have a valuation of NIS 7.7 billion ($2.11 billion), potentially making it the 31st largest company on the Tel Aviv Stock Exchange (TASE) and qualifying it for inclusion in the Tel Aviv-35 Index.
Matrix executives emphasized that entry into the Tel Aviv-35 Index is a major incentive for the merger but not the only one. The deal is expected to:
- Expand Matrix’s presence in the U.S., leveraging Magic’s foothold in the American market.
- Attract more foreign investors, creating momentum for a future Nasdaq listing.
- Strengthen financial performance, as Magic has higher profit margins than Matrix.
- The merger would make the combined company the 10th largest IT company listed in the U.S. and the 4th largest IT company in Europe—suggesting that Matrix may also consider listing on a European stock exchange.
Institutional Resistance and Transparency Concerns
Despite the positive market reaction, the deal faces opposition from institutional investors. Harel Insurance (11%) and Clal Insurance (7%), Magic’s largest institutional shareholders, have expressed skepticism about the synergies and merger ratio.
An unnamed senior shareholder told Calcalist: “We don’t see any special synergies that justify approving this deal under the current share ratio.”
Some analysts are also raising concerns about Matrix’s transparency, questioning why the company is not disclosing Magic’s U.S. revenue breakdown—despite citing U.S. expansion as a key motivation for the merger.
“Matrix talks about improving U.S. sales, but it’s not revealing Magic’s sales there. They need to grow in the U.S., but is Magic the best way to do it? They could acquire another company—perhaps not even an Israeli one—that offers greater added value,” said one analyst.
Financial Performance and CEO Pay Disputes
Matrix’s 2024 earnings report, released this week, showed record results, with:
- Revenue up 6.6% to NIS 5.6 billion
- Gross profit up 9% to NIS 833 million
- Operating profit up 14.4% to NIS 450 million
- Net profit up 16.8% to NIS 288.2 million
However, Magic’s profitability rates are higher than Matrix’s, with:
- Gross margin: 28.4% (vs. Matrix’s 14.9%)
- Operating margin: 11.1% (vs. Matrix’s 8.1%)
- Net profit margin: 7.2% (vs. Matrix’s 5.2%)
The merged company is expected to report:
- Gross margin of 18.6%
- Operating margin of 8.9%
- Net profit margin of 5.9%
A dual listing on the Nasdaq would bring the company under U.S. Securities and Exchange Commission (SEC) regulations, potentially ending Gutman’s long-running pay disputes with Israeli institutional investors.
Gutman, one of Israel’s highest-paid executives, has repeatedly faced opposition from minority shareholders over his salary. Matrix has overridden their objections through a special provision in Israeli corporate law, using it five times in the past seven years.
The same method has been applied to Formula’s CEO, Guy Bernstein, who in 2023 received blocked shares worth NIS 171 million ($47.2 million) despite shareholder opposition.
Looking Ahead: A High-Stakes Vote
The biggest challenge now is gaining shareholder approval. Since Formula is an interested party, it cannot vote, meaning the merger needs 51% approval from minority shareholders.
Shareholder meetings will take place in six weeks, and if successful, the merger could be completed within three months. However, given the institutional pushback, success is far from guaranteed.
Gutman, however, remains determined to push the deal forward, betting that the merger will create a company strong enough to outpace competitors and attract global investors.
