Medical Device Daily Correspondent

ZICHRON YA'AKOV, Israel — The opticals industry in Israel is seeing a surge of activity.

The Israeli kibbutz, once a bastion of community property, communalism and socialism, is preparing for its first initial public offering (IPO) on Wall Street.

Shamir Optical Industry, controlled by Kibbutz Shamir in the Upper Galilee, published a draft prospectus to raise $56 million, which would value the company at $225 million after the IPO.

Shamir develops and sells multifocal lens molds and half-finished lenses to other optical laboratories, representing about 88% of its revenue, with the remainder coming from design services for lens producers.

The Kibbutz Shamir, through the Kibbutz Industries Association, boasts two other publicly traded companies on the Tel Aviv Stock Exchange (TASE), but this is its first effort on the U.S. Nasdaq market.

For the first time, company executives, including two members of Kibbutz Shamir — president and CEO Giora Ben-Zeev and deputy CEO, finance and marketing manager Dagan Avishai — will receive options valued at NIS 30 million (about $7.5 million). Once the payments are made, Ben-Zeev and Avishai will be direct employees of Shamir Optical, and no longer receive their salaries through Kibbutz Shamir, another first.

No one seems to be complaining: Kibbutz Shamir's 270 members own 80.5% of Shamir Optical, with 396,000 shares on offer for some $5.5 million, which may double under the “greenshoe“ option. Proceeds would be divided equally among all kibbutz members, regardless of their position or job.

In recent years, Shamir Optical reported rapidly growing sales and profits, largely due to sales, acquisitions and development ventures in Europe and the U.S. The 2005 prospectus states that the company's gross profit margin was 50% of sales, and its operating profit was about a third of revenues. It posted a net profit of $6.4 million for in the January-September 2004 period, double the profit for the corresponding period of 2003.

Shamir Optical plans to use the proceeds from the issue to build a new production facility on the kibbutz, to expand its marketing and distribution network in the U.S., make some acquisitions and investments in Europe, enter emerging markets in China and other countries, repay debts and complete the distribution of a $5.2 million dividend announced last year, of which $4 million was distributed in December. The company distributed $14 million in dividends between 2001-2004.

In other Israel optical industry news, the planned sale of the Halperin Optics chain of retail stores fell through last week. Real estate company Arazim Investment, which had signed a memorandum of understanding to acquire 51% of the optical chain for NIS 31.5 million, withdrew from the deal.

Halperin Optics owner Rabbi Rafael Halpern plans either to wait for a suitable partner or to float the company on the Tel Aviv Stock Exchange by himself. He is demanding that any controlling shareholder would buy all of the chain, or acquire majority control, while leaving him to decide on the appointment of managers.

The chain's 72 stores are fully owned and have aggregate annual sales of NIS 120 million (about $27 million).

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