Purchase of property, posting

RNS Number : 6801U

MTI Wireless Edge Limited

20 October 2010

 



20 October 2010

MTI Wireless Edge Ltd

("MTI Wireless" or the "Company")

Purchase of property, posting of circular and notice of EGM

MTI Wireless, a market leader in the manufacture of flat panel antennas for fixed wireless broadband, is pleased to announce that it has reached agreement in principle with its largest shareholder, MTI Computers & Software Services (1982) Ltd. ("MTI Computers"), to acquire the leasehold interest of its head office located at 11 Hamelacha St., Afek Industrial Park, Rosh-Ha'Ayin, 48091, Israel (the "Property").

Background to the transaction

The Company currently occupies approximately 75 per cent. of the Property, pursuant to the terms of a lease agreement entered into between the Company and MTI Computers on 7 March 2006.  The Company was recently informed that MTI Computers had taken a decision to sell the Property and, as the largest tenant at the Property, MTI Computers offered the Company the opportunity to purchase the Property from it before it would otherwise be sold on the open market.

The purchase price to be paid by the Company is NIS 18,800,000 (approximately US$ 5.2 Million) plus 5 per cent. purchase tax (the "Purchase Price"), and this has been calculated on the basis an independent valuation report dated 26 September 2010 prepared by Haushner & Co (the "Appraisal Report"). Based on the Appraisal Report, at the purchase price above, and including expenses, the Director's believe that the valuation yield to the Company on the total purchase cost of the Property is approximately 9% per annum at current rental levels. 

The Company intends to fund approximately US$ 2.9 million of the Purchase Price from its existing cash resources, which as at 30 June 2010 amounted to US$ 12.3 million. The remainder of the Consideration, together with any applicable taxes (approximately US$2.5 million in aggregate) will be financed via a bank loan secured on the Property.

Following the purchase of the Property, the Directors anticipate that the Company's operating costs will be reduced by approximately US$ 300,000 on annual basis (based on the Company's anticipated operating costs as at 31 December 2010) by virtue of the fact that it will no longer pay rent under its existing lease of the Property and it will also  receive lease income in an amount similar to the depreciation on the Property purchase and cash flow (after financing costs) of approximately US$ 100,000 per year from the Property for rent received from the existing tenants. 

Lease agreement

Following the purchase of the Property by the Company, MTI Computers will continue to occupy approximately 1,100 square metres of the Property (representing the majority of the Property not occupied by the Company) and the Company will let this to MTI Computers. The term of the lease is for an initial period of 5 years, with an option in favour of MTI Computers to extend the lease for an additional 5 year period (the "Option Period"). The rent for the leased area is US$ 10,000 per month throughout the initial period and will be increased by an amount of 10 per cent. for the Option Period. In addition to the monthly rental payments, MTI Computers will pay to the Company a monthly management payment of US$ 7,150 per month as a contribution towards certain expenses (including insurance, the use of the car park, maintenance services, rates, water and electricity). This amount will be increased by 3 per cent. on a yearly basis.

Notice of EGM

Under Sections 270(4) and 275 of Israeli Companies Law 5759 - 1999 the execution by the Company of the purchase and the lease agreements described above requires the approval of the Company's audit committee and of the board of directors of the Company as well as a special majority vote of the shareholders of the Company.  The audit committee and the board of directors of the Company separately approved the Transaction on 17 October 2010.

A circular will be dispatched to the shareholders during the course of today containing a notice convening an Extraordinary General Meeting ("EGM") at the offices of Allenby Capital Limited, Claridge House, 32 Davies Street, Mayfair, London, W1K 4ND, United Kingdom at 2.30pm (London time) on 24 November 2010.

The definitive agreements for the purchase of the Property and the lease to MTI Computers will be executed after receiving shareholders approval at the EGM.

Related party contract

In view of MTI Wireless' relationship with MTI Computers, and in particular the fact that Zvi Borovitz and Moshe Borovitz  are directors of both MTI Wireless and MTI Computers, this acquisition is considered to be a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. The Company's directors (with the exception of Zvi Borovitz and Moshe Borovitz), having consulted with the Company's nominated adviser, Allenby Capital Limited, consider that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

A circular containing full details of the transaction will be dispatched to shareholders during the course of today and it will shortly be available for download, together with the notice of EGM, from the Company's website www.mtiwe.com in accordance with AIM Rule 20.

-ends-

For further information please contact:

MTI Wireless Edge Dov Feiner, CEO Moni Borovitz, Financial Director	http://www.mtiwe.com/ [phone]
Allenby Capital Limited Nick Naylor Alex Price	[phone]
Threadneedle Communications Graham Herring Josh Royston	[phone]

About MTI Wireless Edge Ltd

MTI is engaged in the development, production and marketing of High Quality, Low Cost, Flat Panel Antennas for Commercial & for Military applications. Commercial applications such as: WiMAX, Wireless Networking, RFID readers &, Broadband Wireless Access. With over 40 years experience, supplying antennas 100KHz to 90GHz including directional antennas and Omni directional for outdoor and indoor deployments including Smart Antennas for WiMAX, Wi-Fi, Public Safety, RFID and for Base Stations and Terminals - Utility Market. Military applications includes a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide.

 

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