HERZLIYA, Israel, Oct. 2 /PRNewswire-FirstCall/ -- Formula Systems (1985) Ltd., (Nasdaq: FORTY - News), a leading provider of information technology products, solutions and services, today announced it had signed a definitive stock purchase agreement with Matrix IT Ltd a leading IT integrator and IT solutions and services provider, an 85.5% owned subsidiary of Formula. Under the terms of the agreement, Formula will sell all of the ordinary shares it owns in its subsidiaries, New Applicom Ltd., Sintec Advanced Technologies Ltd. and Sivan Training and Systems Ltd. to Matrix.

• New Applicom provides comprehensive software solutions to large and leading organizations in Israel and other entities worldwide, with a focus on turnkey and consulting projects based on proprietary and third-party software products;
  
  
• Sintec offers integrated business solutions consisting of hardware integration services;
  
  
• Sivan is one of Israel's leading providers of computer training and knowledge solutions and services.

The shares of New Applicom, Sintec and Sivan are traded on the Tel Aviv Stock Exchange. Formula will sell the shares to Matrix for an aggregate purchase price of approximately NIS 129 million (approximately $27 million). The sale price is equal to the equity per share of each of the subsidiaries

Formula also announced that it is commencing a cash tender offer for the ordinary shares of New Applicom, Sintec and Sivan not already owned by Formula. Tendering shareholders will receive NIS 17.5 for each share of New Applicom tendered, NIS 4.0 for each share of Sintec tendered and NIS 0.7 for each share of Sivan tendered. Shares tendered to Formula pursuant to the tender offer will be sold to Matrix pursuant to the terms of the stock purchase agreement at the same prices per share as the prices per share paid by Formula in the tender offer. The tender offer will not be conditioned upon the closing of the transactions under the stock purchase agreement.

The closing of the sale of shares to Matrix is subject to the approval of Matrix's shareholders, which is required under Israeli law.

Matrix has informed Formula that, following the completion of its purchase of Formula's interest in New Applicom, Sintec and Sivan, Matrix will commence an exchange offer for all shares of New Applicom, Sintec and Sivan not sold to it by Formula. It is currently anticipated that tendering shareholders will receive 3 ordinary shares of Matrix for each share of New Applicom tendered, 0.65 ordinary shares of Matrix for each share of Sintec tendered and 0.2 ordinary shares of Matrix for each share of Sivan tendered. The exchange ratios are subject to change prior to the commencement of the proposed exchange offer based on material changes in the financials markets and the business environment.

Dan Goldstein, Chairman of Formula, said: "This transaction will create the largest information technology company in Israel, providing Matrix with critical mass, operating efficiencies and a more unified corporate structure and identity. It will also provide Matrix's customers with the benefit of obtaining a broad range of services under one roof. The transactions also further Formula's goals of simplifying and enhancing the efficiency of our corporate structure and strengthens Formula's focus on its principal operating divisions."

Formula Systems (1985) Ltd. (Nasdaq: FORTY - News):

Formula Systems (1985) Ltd., is a global information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services, developing proprietary software products and providing computer-based business solutions.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

Statements in this press release concerning the long-term plans for the companies and the future potential benefits for existing investors constitute forward-looking statements. Such statements involve various risks that may cause actual results to differ materially. These risks and uncertainties include, but are not limited to: the risks associated with the completion of the transactions, including the satisfaction of conditions to closing, market demand for the companies' products, dependence on strategic partners, integration of new business, successful implementation of the companies' products, economic and competitive factors, international market conditions, management of growth, technological developments, the ability to finance operations and other factors which are detailed in the companies' Securities and Exchange Commission filings including its most recent Form 20-F. Formula does not undertake any obligation to publicly release any revision to any forward-looking statement.