Formula unit Blue Phoenix wins $30m German contract
The company also plans to raise $8 million in convertible notes on the TASE. Blue Phoenix CEO Arik Kilman: We want to be exposed to the Israeli capital market.
Shiri Habib 23 Jan 06 10:20
Blue Phoenix Solutions Ltd. (Nasdaq: BPHX; TASE: BPHX) made two interesting announcements to its investors late last week. On Thursday, the company announced that it had signed a large contract with Germany’s T-Systems Enterprise Services GmbH, and on Friday the company said it would file a draft prospectus with the Israeli Securities Authority and the Tel Aviv Stock Exchange (TASE) in connection with a possible underwritten offering to the public in Israel of convertible notes. The company’s share fell 3% on Nasdaq on Friday.
Blue Phoenix, which develops and markets software suites of tools and services for upgrading and modernizing enterprise mainframe and distributed IT networks, has a market cap of $56.4 million. Blue Phoenix estimates that its contract with Deutsche Telekom (NYSE: DT; XETRA: DTEG) subsidiary T-Systems will generate $30 million in revenue over five years. T-Systems is one of Europe’s leading providers of information and communications technology (ICT). Blue Phoenix will be a subcontractor to migrate the legacy databases to modern relational standard databases of a large German customer of T-Systems.
Blue Phoenix CEO Arik Kilman said, "We cannot disclose the identity of the customer, but it is a large international company.” Under the contract, T-Systems will manage the project, and Blue Phoenix will supply the professional tools. The contract has a two-year option to extend.
Formula Systems (Nasdaq: FORTY; TASE: FORT) owns a 51.6% controlling interest in Blue Phoenix. Blue Phoenix posted a net profit of $980,000 on $43.5 million revenue in January-September 2005, and had $8.3 million in cash at the end of September.
On the offering in Tel Aviv, Blue Phoenix said, “Each note will be convertible into ordinary shares of Blue Phoenix. Holders may convert the notes into Blue Phoenix's ordinary shares at conversion rate of one ordinary share per $5.60 principal amount of notes. The proceeds from the offering, if completed and subject to market conditions, are expected to be approximately $8 million.” The institutional stage of the issue is scheduled for Tuesday.
Kilman said, “The issue has two purposes. First, we want to be exposed to the Israeli capital market. We’re a fairly unknown company. We waited until we had a formal plan, and we’re now holding the issue. Second, we want to finance growth. We’re not necessarily talking about acquisitions, but also the hiring of workers, and everything related to the needs of a growing company.”
Published by Globes [online], Israel business news - www.globes.co.il - on January 23, 2006
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