Pilat Technologies To Seek Demerger Of Its Media Software Business

Press Release: 4 January 2001

London and Tel Aviv, 3rd January 2001 - Pilat Technologies International Limited ('PILAT'), the Israeli software and consulting group co-listed on AIM and the Tel Aviv Stock Exchange, announces that its Board has now formally agreed to seek a demerger of its media software business. It is intended that the demerged business will become separately quoted on the Official List of the London Stock Exchange and the Tel Aviv Stock Exchange. The Board of PILAT expects this process to be completed later this year, subject to the necessary approvals and market conditions. PILAT is being advised by Investec Henderson Crosthwaite.

The demerger is planned as a 'horizontal split' to a company newly incorporated in the UK, temporarily named Pilat Media IT Ltd. ('Pilat Media'). Pilat Media will acquire all of the assets and liabilities of the media business in consideration for its newly issued shares. Pilat Media's shares will be allotted to the Company's shareholders, pro rata to their shareholding in the Company. In pursuit of the split PILAT has submitted an application for its qualification as a tax-free event under the Israeli Tax Ordinance to the Israeli Tax Commissioner. A request for approval of the demerger has been submitted to the Israeli District Court.

The Board of PILAT has for some time been considering ways of enhancing overall shareholder value through allowing increased focus on the development of its two diverging areas of core expertise, namely (1) software, consultancy and services for human resource management offered internationally from offices in the UK, USA and Israel, and (2) the provision of television channel and ad-sales management software for international broadcasters. As a result of this review, the Board has decided that it will be in the interests of shareholders to split PILAT into two independent businesses that would be more attractive to specialist resources, investors and management alike.

Pilat Media wins new contracts

Pilat Media is also pleased to announce that it has won new contracts with broadcasters including Channel 5 (UK), Cinenova (a new European Disney/Sony partnership) and Digital Latin America of Florida USA for the supply of channel management systems. The first year value of these new contracts is estimated at approximately £1.5 million.

Background on Pilat Media

The business of Pilat Media commenced in 1997 through the development of its Integrated Broadcast Management System (IBMS) for BSkyB. IBMS was designed to enable BSkyB to manage efficiently its growing multi-channel operations into the digital era, integrating the processes of content acquisition, programme asset management, certification and editorial tracking, access controlling, pay-per-view and NVOD administering, programme planning and scheduling down to transmission and post transmission reconciliation.

In late 1998, Pilat Media secured exclusive long-term rights to utilise the IBMS technology in return for the payment of royalties to BSkyB, and subsequently launched IBMS as a commercial product for third party use. Since then the company has had considerable success in the development of its business, and following the acquisition of a competitor, Rebus Media, in late1999 it now serves over a dozen clients internationally including BSkyB, Fox Kids (Europe), Network Ten (Australia), Sky Network Television, TVNZ, Yes (Israel), LAPTV (US), Fox Sports (Australia), SuperSport (South Africa), MTV Europe (UK), and UPC (Europe). The contract with Network Ten of Australia is to provide its existing IBMS services, but also to develop a new ad-sales system complementary to IBMS, which will substantially broaden the scope of Pilat Media's product and service offering. Network Ten will act as a beta reference site for the new system when it becomes available later this year.

The Directors of PILAT believe that the rapid current development of the international broadcast market, with the onset of multi-channel digital and interactive platforms and broadcasters, provides substantial new revenue and expansion opportunities for Pilat Media. Target groups include the national and international broadcasters, cable operators, digital satellite broadcasters, multi-channel providers, and the growing number of interactive television and portal operators.

Commenting on the announcement, Avi Engel, CEO of PILAT, said:

'We are convinced that the demerger of Pilat Media will substantially enhance overall value for our shareholders. It will not only allow each of our core businesses to have greater strategic and investment focus, but will also positively incentivise their management teams to grasp the considerable opportunities available to them in their respective markets.

'Pilat Media is demonstrating exciting growth and picking up high quality broadcasting clients in both analogue and digital television. - we are delighted to have added Channel 5, Cinenova and Digital Latin America to our list of clients. The massive changes taking place in television internationally in terms of digital, interactive and video on demand programming lead us to believe that our services will only become more valuable to broadcasters and airtime sales teams seeking to handle increasingly complicated broadcast management requirements. As a separately quoted company, Pilat Media will be well placed to develop further its expertise in this arena and pursue an expansionist strategy internationally to secure its position at the forefront of the industry.

For PILAT also the demerger represents an exciting platform to refocus its skills and resources for the fast-growing HR market, and the Board firmly believes that PILAT's reputation and capabilities in software development and consultancy with existing blue-chip clients such as the World Bank and Credit Suisse First Boston stand it in very good stead for considerable growth ahead as a stand-alone company.'

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