The struggle for Novolog: Controlling shareholder tries to dissolve the board after Movement's buyout offer

Novolog shares are surging this morning against the backdrop of a struggle for control developing within the company. The Movement group, controlled by Eli Dahan, is interested in becoming its largest shareholder, and the current controlling shareholder, Ehud Pozis, who would be diluted and lose control as a result, is seeking to dissolve the board of directors to prevent this.

Movement, which operates in the fields of fitness, health, and medical technology, submitted a binding offer to the Novolog board of directors to invest 100 million shekels in exchange for an allocation of shares that would bring it to a 21.34% stake. Movement is prepared to execute the move 'as is' without due diligence, but set a short validity period: Novolog must accept or reject it by August 5, 2026.

The authority to make the decision lies with the Novolog board of directors, chaired by Arik Shor. However, Ehud Pozis (26.7%), whose family founded Novolog, is seeking to prevent this. Shortly after the submission of the offer, Pozis requested to convene a shareholders' meeting to replace all incumbent directors, except for the two external ones and himself, with three new directors. Approval of this move would prevent the board from discussing the Movement offer in time, thus thwarting it.

The reason for Pozis's move: accepting the offer is expected to dilute his holdings to 21%, slightly less than Movement's, and remove him from control. Movement's offer comes against the backdrop of difficulties Novolog has suffered over the past two years. It is currently traded at a value of 361 million shekels, 37% lower than its 2017 IPO value (571 million shekels). Since reaching a peak of 1.8 billion shekels in July 2022, it has wiped out almost 1.5 billion shekels in value.

The difficulties arose from numerous write-downs, a distribution management system malfunction that caused tens of millions of shekels in damages last year, and negative effects from the war with Iran. Notably, pharmaceutical giant Pfizer ceased working with the company.

Novolog operates in three divisions:

• Logistics division (the main one): storage and distribution of drugs, logistics for clinical trials, and sterilization of medical equipment.

• Healthcare services division: technology-based medical services, home care, personalized medicine, and laboratory services.

• Digital division: digital medical services (significantly smaller than the others).

The main shareholders, besides Pozis, are institutional entities: Migdal (14%), Phoenix (12%), Harel (11%), and Clal (6%). Businessman Mori Arkin holds an additional 9%.