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OR YEHUDA, Israel - Magic Software Enterprises Ltd. (NASDAQ:MGIC), an IT consulting and software solutions provider with strong financial health according to InvestingPro analysis, has signed a Memorandum of Understanding (MOU) for a proposed merger with Matrix I.T Ltd. (TASE:MTRX), a prominent Israeli IT services firm. The MOU, dated March 10, 2025, outlines the intention for Matrix to acquire all outstanding shares of Magic, resulting in Magic becoming a privately held subsidiary of Matrix through a reverse triangular merger. Magic Software, currently trading at $12.85 and operating with moderate debt levels, has maintained consistent dividend payments for 13 consecutive years.
The merger aims to combine Magic’s international presence and low-code/no-code application platforms with Matrix’s IT services and market dominance in Israel. The combined entity is expected to create a more resilient IT services provider with an estimated market value of $2.1 billion, positioning it among the largest publicly traded IT services companies in the U.S. and Europe.
The companies anticipate operational synergies and efficiencies, with the merged entity operating in about 50 countries, serving approximately 6,000 clients, and employing over 15,000 people. Financial highlights from the potential combined entity, had the merger occurred in 2024, include $2.1 billion in revenues, a gross profit of about $382 million, and a net income attributable to non-controlling interests of approximately $110.6 million. According to InvestingPro data, Magic Software currently generates $535.48 million in revenue with a healthy gross profit margin of 28.42% and strong free cash flow yield. Discover more detailed financial analysis and 6 additional ProTips with an InvestingPro subscription.
Magic’s Board of Directors, with recommendations from an independent committee, approved the MOU, which is not legally binding except for certain provisions. The merger consideration will be in Matrix’s ordinary shares, with Magic shareholders receiving a 31.125% stake in the issued and outstanding share capital of Matrix post-merger.
The definitive agreement is subject to due diligence, fairness opinions, regulatory approvals, and approvals from the companies’ respective boards and shareholders. The merger is also contingent on a pre-ruling from the Israeli Tax Authority and other third-party consents.
Magic’s Board of Directors, with the independent committee’s endorsement, has deemed the merger structure and signing of the MOU to be fair and in the best interests of Magic and its minority shareholders. However, the finalization of the merger is pending the fulfillment of various conditions outlined in the definitive agreement.
This announcement is based on a press release statement and does not constitute an offer of securities for sale in any jurisdiction. The forward-looking statements included are not guarantees of future performance, and actual results could differ materially. Based on InvestingPro’s Fair Value analysis, Magic Software appears undervalued at current levels, with analysts setting a consensus target price of $15. Get access to the comprehensive Pro Research Report, available for Magic Software and 1,400+ other US stocks, offering deep-dive analysis and actionable investment insights.
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