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(photo credit: AP)
The battle over the control of Magal Security Systems Ltd. is intensifying as a
group of dissident shareholders prepare for a hostile takeover ahead of an
extraordinary shareholder meeting next Thursday.
Former Magal executive
Yoav Stern is leading the group of dissident shareholders seeking the takeover.
He is being accused of attempting to extort Nathan Kirsh, who is the company’s
biggest shareholder, with a 24 percent stake.
In a letter sent by Kirsh’s
attorney, Avigdor Klagsbald, Stern is quoted as requesting from Kirsh in
threatening email to abstain from the shareholder vote.
“I think you
should abstain from a vote in this upcoming [meeting],” the e-mail says,
according to Klagsbald’s letter.
“This will be an elegant solution for
all, before it all gets too ‘muddy’... I think it is highly unlikely
would win, but if you do, your mess will be a big one.”
In June, a group
of shareholders, including three US investment funds that together own
approximately 17% of the outstanding shares of the company, requested to
an extraordinary general meeting with the aim of replacing the majority
company’s board of directors.
The dissident shareholders said Kirsh’s
allegations, as represented in Klagsbald’s letter, were an attempt by
company’s management to mislead shareholders ahead of the vote.
accusations are a pathetic attempt to stitch together words and parts of
sentences taken out of context from straightforward business
between Kirsh and Stern, in which Stern was responding to Kirsh’s
convince him to withdraw from the proposal to replace the board of
according to a statement by the US investment funds.
The funds, Diker
Management, Clough Capital Partners and Prescott Group Capital
seeking to elect five individuals to the board and to replace all of the
board members other than Kirsh and the company’s two outside directors
appointed in accordance with Israeli law.
The nominees under proposal are
Stern; Israel Shafir, a former Magal executive; Avihu Ben- Nun, a former
chairman of General Motors R&D center in Israel; Zivi Nedivi, a
of Axiom Investment Advisors; and Ami Amir, general partner at Partech
“I urge you not to support the proposal and to give
[management] and its team the opportunity to bring Magal back to
which I am confident they will achieve,” Kirsh said in a statement to
Magal Security Systems was founded in 1970 by Israel
Aerospace Industries (formerly Israel Aircraft Aerospace Industries) and
global provider of security, safety and site-management solutions and
In 1984, Kirsh acquired a majority interest in the company,
purchasing 74% of the outstanding shares from IAI. In the first quarter
year, the company generated revenues of $9.8 million and incurred a net
Stern was Magal’s interim president beginning in November 2008 and
interim president and CEO from February 2009 until July 2009.
after a trial period, it was generally felt that based on his managerial
it would not be in the company’s best interests to make his appointment
permanent, according to Kirsh.
Stern was accused of improperly
terminating a number of senior employees and causing an “almost
damage” in the morale of the remaining employees.
“During his term in
office the employees operated in a hostile environment and were
terrified by his
managerial style,” the company said in a statement.
insulted, and the relationships of the company with its business
harmed as a result of his arrogant and erratic behavior.”
Stern is now
being accused of improperly using internal company information, thereby
infringing contractual agreements.
Stern was not available for comment
when contacted by The Jerusalem Post