Intel’s turmoil puts high-stakes business deals at risk
Intel’s turmoil puts high-stakes business deals at risk
Disruptions at Intel’s Israeli operations are creating instability in ongoing mergers and acquisitions. The Rimon Group is trying to reduce the value of Pach Taas in a deal agreed earlier this year in which it was valued at over $50 million, as the former could lose lucrative deals due to the suspension in construction of Intel's new plant.
The deal in which publicly traded Rimon is set to acquire 50% of Pach Taas for a valuation of NIS 200 million (approximately $53M) may soon fall through, Calcalist has learned.
The memorandum of understanding for the deal, signed last April, has not yet materialized into a binding agreement. This delay is attributed to the challenges faced by Intel, which is currently reevaluating several of its plans, including the establishment of a new plant in Israel. This could severely impact Pach Taas, a company involved in developing and producing technologies for air treatment and industrial ventilation. As a result, Rimon is reconsidering its decision to purchase shares for NIS 100 million ($26M).
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Pach Taas owner Aharon Shapira (left), Rimon CEO Yossi Almalem
(Photo: David Moskovitz)
Intel is currently undergoing a series of changes, including workforce reductions that could lead to the layoffs of up to 1,000 employees out of its 11,700 in Israel. Additionally, Intel has decided to spin off its manufacturing division into a subsidiary, and reports suggest that Qualcomm has expressed interest in acquiring the company.
In June, Intel froze its planned $25 billion expansion of the Kiryat Gat facility, a decision with significant ramifications for its subcontractors, such as publicly traded Lesico, which disclosed that this decision would affect NIS 90 million in contracts it had with Intel. Intel is also a key client of Pach Taas. Reportedly, Intel ordered 16 custom units from Pach Taas for NIS 170 million and contracted the company for an air duct project worth an additional NIS 300-400 million. Furthermore, Intel placed a series of orders totaling NIS 11 million in 2022. To put this in perspective, Pach Taas’s annual sales turnover stands at approximately NIS 300 million ($80M).
Negotiations between Rimon and Pach Taas are ongoing, but given Intel's current situation, Rimon is pushing to lower Pach Taas's valuation in the deal. It remains unclear whether Pach Taas will agree to these revised terms. Asiag Consultants are advising Pach Taas in the transaction.
In 2020, Tadiran, controlled by Moshe Mamrod, signed a deal to acquire a 70% stake in Pach Taas for NIS 100 million, but Mamrod canceled the agreement two months later. That deal valued Pach Taas at NIS 142 million. In comparison, the current deal with Rimon reflects a 45% higher valuation.
Today, Pach Taas, which was founded 50 years ago, is owned by partners Aharon Shapira and Avi Cohen. The company expanded through acquisitions of various firms, which became its subsidiaries. Rimon intends to acquire Shapira's share, while Cohen will continue to manage the company. Additionally, Shapira will be entitled to withdraw a NIS 20 million bonus based on the company’s EBITDA performance between 2025 and 2027.
