Shaul Shani again tries to sell ECI to Russians

BoI keeps rate unchanged, cuts growth forecast

"Izvestia" reports that the potential buyer is Rosatom Nuclear Energy State Corporation.

ECI Telecom Ltd. chairman and controlling shareholder Shaul Shani continues to talk to the Russian government about selling the Israeli telecommunications equipment company. Just after a year after it was reported that Shani had written to Russia's President Dmitry Medvedev about buying ECI for $2.5 billion, Medvedev has another possibility for buying the company, according to Russian newspaper Izvestia. This time, the potential buyer is Russian atomic energy giant Rosatom Nuclear Energy State Corporation, which is state owned.

According to the Russian newspaper, the talks on merging ECI into Rosatom are at a valuation of $5 billion, but it would appear that this refers to the total value of a project or activity in which ECI would be involved in Russia. ECI's value will probably be closer to $500 million.

Sales in decline

ECI was acquired by private equity company Swarth Group, owned by Shani and the Ashmore group, towards the end of 2007 for $1.24 billion. The company's sales and value declined in the years of the global economic crisis in 2008-2009, when investment in equipment by telecommunications providers slowed. ECI has also not managed to improve its product offering substantially. The company is estimated to have had annual sales in the region of $600-700 million in the past few years.

The potential buyer, Rosatom, is a conglomerate of hundreds of technology units, mostly in the energy field, and according to reports displayed on the company's website, it had sales of $15 billion in 2010 and a net profit of $1.3 billion. The Russian company has plenty of cash available for investing in technology acquisitions, further to Russia's attempts in recent years to enhance its technological capabilities. According to Izvestia, acquiring ECI will give Rosatom all of ECI's technologies, the intention being to provide infrastructures for deploying secure telecommunications in the Penza region.

"Grows businesses for sale"

The report quotes an associate of Shani who describes him as "a man of vision who grows companies for sale." The description is accurate. In 2009, Shani sold Brazilian telecommunications company GVT, which he founded in the 1990s, to French company Vivendi for $4.2 billion. Shani's share was $1.2 billion, and he entered the list of the wealthiest people in Israel, after a long period in which it seemed as though the Brazilian company had come to the end of the road.

At present, it looks as though the current report, just like at the end of 2010, will not lead to an acquisition even though Russia is among ECI's biggest customers. The report cites government sources as saying that they believe that now is the best time for carrying out the acquisition, but last time around too sources were quoted in the Russian press that said they believed that the Russian government would accept Shani's offer and pay $2.5 billion for the company, which did not happen in the end.