Thursday August 30, 4:15 am Eastern Time

Israel's Iscal takes stake in Formula Systems

JERUSALEM, Aug 30 (Reuters) - Israeli software firm Formula Systems (Nasdaq: FORTY - news), said on Thursday that Iscal Holdings has taken a stake in Formula as part of a complex deal that, if completed, would give Formula 53 percent of Iscal.

Under the terms of the agreement, Iscal has paid $25 million for 600,000 ordinary shares of Formula. Within 180 days, an additional one million Formula shares will be sold to Iscal in exchange for convertible notes, Formula said in a statement.

It was not clear what percentage of Formula shares Iscal would be acquiring, and the company was not immediately available to comment.

If the convertible notes are converted in full, Formula's top two executives Dan and Gad Goldstein, will be issued ordinary shares of Iscal representing 53 percent of the current outstanding stock.

The notes, worth a total of $43 million, will bear no interest and, if not converted earlier, will be payable on June 30, 2004.

``We believe the addition of Iscal as a principal investor will strengthen Formula's investor base,'' Dan Goldstein said in the statement.

Dan Goldstein, currently chairman and chief executive officer of Formula, and Gad Goldstein, the company's president, will remain as officers and directors of Formula.

Formula provides software consulting services and develops software. Its shares closed down 42 cents at $16.75 on Wednesday, after touching a 52-week low earlier in the session.

Its Tel Aviv shares were off 0.4 percent in late morning trade, while Iscal's shares were not traded.