Perion Plunges on Deal Valuation Disappointment: Tel Aviv Mover

Perion Network Ltd. dropped the most in more than three years as investors were disappointed by the lack of premium in the merger with toolbar-developer Conduit Ltd.’s Client Connect business.

The shares of Tel Aviv-based Perion, which makes desktop programs for e-mail, photo-sharing and web security, plunged 15 percent, the biggest drop since March 2010, to 40.83 shekels at the close in Tel Aviv. More than 11 times the three-month average of shares changed hands.

The combination will be an all-share transaction which is subject to approval by Perion’s shareholders in a November vote and customary regulatory and tax rulings, according to an e-mailed statement today from the two companies. Conduit was reported in July to be in advanced talks to acquire Perion for $200 million in a deal that would value Perion at a 46 percent premium at the time, according to business daily TheMarker.

“Perion investors were building up momentum for a premium here so when that didn’t come, they were disappointed,” Beni Dekel, an analyst at Union Bank of Israel Ltd. in Tel Aviv, said by phone today. “This deal is still obviously very good for Perion shareholders as they’ll get great synergy opportunities with the Conduit partnership.”

Conduit shareholders will get 81 percent of the newly merged company while Perion shareholders will hold 19 percent. Perion’s market capitalization was $159 million in the U.S. as of the close on Sept. 13, giving the new company a value of about $837 million, according to Bloomberg calculations.

The deal will make Perion “a significant force” in search distribution with sales of $367 million, according to the statement. Perion’s current Chief Executive Officer Josef Mandelbaum will continue in the position.

Investors in Conduit, a Ness Ziona, Israel-maker of community toolbars and mobile applications, include Benchmark Capital, which invested $8 million in 2008, according to Conduit’s website. An investment fund advised by JPMorgan & Chase Asset Management acquired a 7 percent stake in the company for $100 million, valuing it at $1.3 billion, Conduit said in April. The company was founded in 2005 and also has offices in California.

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