What does Shaul Shani want from Russia's President Dimitri Medvedev? It is difficult to understand what led Shani to make contact with the Russian head of state and offer to sell ECI Telecom for $2.5 billion. However, Russia today, and for the past two decades, has been a capitalist country in every sense.
On the other hand, Shani is not your standard Western businessman. He saw the way business activities operate in emerging economies as head of GVT in Brazil and deeply understands the forces moving the BRIC (Brazil, Russia, India, China) economies.
Is there any chance that the Russian government will be involved with an Israeli company as either the matchmaker or even purchaser? Anything is possible. But rationally speaking, it is hard to believe that the information and potential scenario published in the Russian media will actually happen, even though the letter was actually sent by Shani to Medvedev. The company value of $2.5 billion for ECI seems cut off from reality. Standard economic principles do not support such a price. But maybe on the margins of the Russian economy, there are still political and economic forces that have no clear logic to those looking in from the outside.
Either way it is possible that the acquisition of ECI is on the agenda. And there is even an historical element to the offer. At the same time as Makhteshim Agan Industries Ltd. (TASE: MAIN) is in talks to be sold to the Chinese, the sale of ECI, which was once Israel's flagship high-tech company, is not that different. But this is the first time that such a large company would be sold to the Russian government or a Russian entity. The aim of the Russians would be to use ECI's IP to create a broad technological base in the field of communications equipment.
Israel's high-tech is not built for such steps. Even acquisition by an American company does not promise anything regarding future activities, although this is still relatively safe ground.
In any event the acquisition of ECI would be an interesting test case although it will make for a particularly strange option.
Published by Globes, Israel business news - www.globes-online.com - on November 21, 2010
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