Just over three years after acquiring ECI Telecom Ltd., controlling shareholder Shaul Shani has formally put the company up for sale. Unexpectedly, the list of potential buyers includes not only telecommunications equipment companies, which might seek to profit from synergies with ECI, but more exotic entities controlled by the Russian government.
"I want to bring to your attention that we are considering the sale of 100% of ECI shares for $2.5 billion, and I advise you to consider acquiring the company," ECI chairman Shani wrote in a letter to Russian President Dmitri Medvedev in early November.
Russian media reports over the weekend say that the Russian government is in talks to acquire ECI for double the price that Swarth Group, the investment vehicle controlled by Shani, paid for it.
ECI said in response, "In the past year, the company has received a number of inquiries from global companies about strategic cooperation in some form. The company regularly examines these inquiries."
ECI has 2,300 employees, most of them in Israel.
This is not the first time that an Israeli businessman has officially written to another party to buy his company. In 2005, Iscar Ltd. chairman Eitan Wertheimer offered the company to Warren Buffett. Buffett's answer was an invitation to Omaha, where he wrote out a check. However, there is a huge difference between writing to Buffett, a world-class businessman, and writing to the president of a country to involve government companies.
Swarth Group, controlled by Shani and Ashmore Investment Management Ltd. (LSE:ASHM) acquired ECI in 2007 for $1.24 billion. A company value of $2.5 billion seems incredible, as does the wonderful turnaround at the company, and it may be too good to be true.
Russian website "Cnews" says that experts doubt the feasibility of a deal, but bring in other opinions that support it, and claim that a deal is close. "Cnews" quotes coordinating committee for economic assistance deputy chairman Mikhail Asipov says that the rationale is that ECI is the only telecommunications company that agreed to reveal its technology to the Russians. He said that acquiring ECI and combining it with companies such as MFTI and Supertel, as well as the academic center of Russia's spy agency, the FSB, could create "a technology R&D center that will meet Russia's defense needs and the requirements of President Medvedev."
The Russian media also reports that Medvedev ordered the Russian government to examine Shani's offer, and that the Russian Ministry of Communications and Information has asked for details about ECI. The reports said that the Russian government would probably agree to the offer.
Published by Globes [online], Israel business news - www.globes-online.com - on November 21, 2010
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