BEL FUSE INC NJ

Current report

The Enercon Purchase Agreement includes a number of closing conditions and, if these conditions are not satisfied, the Enercon Purchase Agreement may be terminated in accordance with its terms and the acquisition may not be completed. *** We may fail to consummate the proposed Enercon acquisition, may not consummate the proposed acquisition on expected terms, or may not achieve the expected benefits.***

Current report

In September 2024, we entered into the definitive Enercon Purchase Agreement with the Sellers to acquire an 80% stake in Enercon upfront at the closing, with the intent to purchase the remaining 20% interest in Enercon by early 2027 based on a put-call mechanism to be set forth in shareholders’ agreement to be entered into at closing. It is currently anticipated that the acquisition of the 80% interest pursuant to the Enercon Purchase Agreement will be completed in the fourth quarter of 2024. However, completion of the proposed Enercon acquisition is subject to satisfaction of customary closing conditions, including applicable regulatory approvals. Until all such closing conditions are satisfied or waived, the possible timing and likelihood of completion of the proposed Enercon acquisition are uncertain, and, accordingly, there can be no assurance that the Enercon acquisition will be completed on the expected terms, on the anticipated timing or at all. The Enercon Purchase Agreement may also be terminated prior to the consummation of the transaction by the mutual written consent of Bel and the Sellers and in certain other circumstances, including a termination right by either Bel or the Sellers, subject to certain terms and conditions, if the Closing has not occurred on or prior to the date six months following execution of the Enercon Purchase Agreement. We may experience unanticipated difficulties, delays, and expenditures relating to the proposed Enercon acquisition. Any delay in consummation of the Enercon acquisition may result in greater transaction costs and professional fees incurred by us. In addition, even if the proposed acquisition of the majority 80% stake in Enercon is completed pursuant to the Enercon Purchase Agreement, there can be no assurances that we will complete the acquisition of the remaining 20% interest in Enercon by early 2027 as intended.

Current report

Our efforts to complete the Enercon acquisition could cause substantial disruptions in our business. A substantial amount of our management’s attention is being directed towards the completion of the Enercon acquisition and such distraction could affect our management’s ability to service our existing business, pursue other business opportunities or could otherwise adversely affect our business. The announcement, pendency, and efforts to implement the acquisition may disrupt our and Enercon’s plans, operations and relationships with customers, suppliers, distributors, business partners and regulators, and can cause potential difficulties in employee retention.

Current report

If consummated, the success of the Enercon acquisition will depend, in significant part, on our ability to successfully integrate the acquired business, establish and maintain good relationships with new and existing customers, suppliers, and other business partners, grow the revenue of the consolidated company and realize the anticipated strategic benefits and synergies. The combination of businesses is a complex, costly and time-consuming process. As a result, we expect to devote significant management attention and resources prior to closing to prepare for integration, and we expect to devote significant management attention and resources post-closing to integrate the business practices and operations. The integration process may disrupt the businesses and, if implemented ineffectively, would impair the realization of the full expected benefits. The anticipated opportunities in terms of potential growth and expansion offered by, and the anticipated benefits of, the Enercon acquisition may not be realized fully or at all, or may take longer to realize than we expect. Actual operating, strategic and revenue opportunities, if achieved at all, may be less significant than we expect or may take longer to achieve than anticipated. If we are not able to achieve these objectives and realize the anticipated benefits and synergies expected from the Enercon acquisition within a reasonable time, our business, financial condition and operating results may be materially adversely affected.

Current report

We may face risks related to conducting business in Israel following the Enercon acquisition, as conditions in Israel may materially and adversely affect Enercon’s business and as a result the business of consolidated Bel.

Current report

If we successfully complete the acquisition of a majority stake in Enercon, we may be subject to, and possibly adversely affected by, risks related to conducting business in Israel. Enercon, the target of our proposed Enercon acquisition in which we will acquire an upfront 80% stake at the closing expected to occur in fourth quarter of 2024 and intend to acquire the remaining 20% interest by early 2027, is based in Netanya, Israel with additional facilities in New Hampshire, U.S. and Haryana, India. Enercon has approximately 300 employees located in Israel.

Current report

Companies based in or operating in, or having a significant number of employees located in Israel, may be more susceptible to political and economic instability. Political, economic and military conditions in Israel may directly affect their business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighbors. In October 2023, Hamas conducted several terrorist attacks in Israel resulting in ongoing war across the country, forcing the closure of many businesses in Israel for several days. In addition, there continue to be hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities. In early 2023, there were a number of changes proposed to the political system in Israel by the current government which, if implemented as planned, could lead to large-scale protests and additional uncertainty, negatively impacting the operating environment in Israel. Uprisings in various countries in the Middle East over the last few years have also affected the political stability of those countries and have led to a decline in the regional security situation. Such instability may also lead to deterioration in the political and trade relationships that exist between Israel and these countries. Any armed conflicts, terrorist activities or political instability involving Israel or other countries in the region, as well as any interruption or curtailment of trade between Israel and its present trading partners, could adversely affect the business, results of operations, financial condition, cash flows and prospects of Enercon, and of consolidated Bel following the closing of the Enercon acquisition. In addition, any of these events or circumstances involving Israel or the region prior to the closing of the Enercon acquisition may delay or prevent the closing of the proposed Enercon acquisition.

Current report

A number of countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continue or intensify. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on policies promulgated by the Israeli Government. Such boycotts, particularly if they become more widespread, may adversely impact Enercon’s business or our business.

Current report

The operations of the Enercon business could also be disrupted by the absence for significant periods of one or more key employees or a significant number of other employees because of military service. Enercon’s employees in Israel may be obligated to perform military reserve duty, and in certain emergency circumstances, employees may be called to immediate and unlimited active duty in the Israeli armed forces.

Current report

Demand in Enercon’s end markets can be cyclical, impacting the demand for its products, and Enercon’s business could be materially adversely affected by reductions in defense spending.

Current report

Enercon, in which we intend to acquire a majority stake pursuant to the Enercon Purchase Agreement, is a leading supplier of highly customized power conversion and networking solutions to aerospace and defense markets globally. For full fiscal year 2024, an estimated 93% and 7% of Enercon’s projected revenue is attributable to the defense and aerospace end markets, respectively. Demand in Enercon’s end-use markets can be sensitive to general economic conditions, competitive influences, and fluctuations in inventory levels throughout the supply chain. Enercon’s sales are sensitive to the market conditions present in the industries in which the ultimate consumers of its products operate, which in some cases have been highly cyclical and subject to substantial downturns.

Current report

As a result of the high correlation to government spending on defense and budgeting, Enercon has experienced, and in the future, it may experience, significant fluctuations in sales and results of operations with respect to a substantial portion of our total product offering, and such fluctuations could be material and adverse to our overall financial condition, results of operations and liquidity.

Current report

Because certain of Enercon’s products are used in a variety of land, air and sea defense applications, Enercon derives a substantial portion of its revenue from the defense industry. For full fiscal year 2024, an estimated 93% of Enercon’s projected revenue is derived from customers in the defense industry. Although many of the programs under which Enercon sells products to prime U.S. and Israeli government contractors extend several years, they are subject to annual funding through governmental appropriations. While spending authorizations for defense-related programs by the U.S. and Israeli governments have increased in recent years, these spending levels may not be sustainable and could significantly decline. Future levels of expenditures, authorizations, and appropriations for programs Enercon supports may decrease or shift to programs in areas where Enercon does not currently provide services. Changes in spending authorizations, appropriations, and budgetary priorities could also occur due to a shift in the number, and intensity, of potential and ongoing conflicts, shifts in spending priorities from national defense as a result of competing demands for government funds, or other factors. Enercon’s business prospects, financial condition or operating results could be materially harmed among other causes by the following: 1) budgetary constraints affecting U.S. and/or Israeli government spending generally, or specific departments or agencies in particular, and changes in available funding; 2) changes in government programs or requirements; and 3) a prolonged government shutdown and other potential delays in the appropriations process.