ECI in $1.2B Takeover Talks

ECI Telecom Ltd. says it's holding talks with a group of investment firms about the sale of all the company's stock for $10 per share, a price that values ECI at nearly $1.2 billion.

A sale at $10 would represent a 12 percent premium over Friday's closing price of $8.92. ECI's stock has a 12-month high of $9.49.

ECI says "there can be no assurance at this stage as to whether this transaction will be consummated, and if consummated what the actual consideration would be." It also says it won't be commenting further on the issue.

The interested investors are led by Swarth Investments LLC, a company registered in Delaware and controlled by Shaul Shani, who is already active in the telecom sector as chairman of Brazilian fixed line operator GVT .

Shani and GVT are well acquainted with ECI -- more on that later. Koor keen to kash in
The interested sellers are led by a company called IDB Holding Corporation Ltd., which owns about 41 percent of ECI stock through two of the companies it controls -- Koor Industries Ltd. , which holds about 28 percent of ECI's shares, and Clal Industries and Investments, which holds a 13 percent stake in ECI.

Koor said today that, if a sale was agreed at $10 per share, it would make a profit of about 598 million shekels ($143.4 million), while Clal said such a deal would net it 277 million shekels ($66.4 million).

For Koor, at least, increasing competition in the communications equipment sector, intensified by recent M&A activity, has led it to reevaluate its holdings. In its latest annual report, Koor notes that the creation of industry giants such as Alcatel-Lucent (NYSE: ALU) and Nokia Networks , and the acquisition-fueled expansion of Ericsson AB (Nasdaq: ERIC), is making life tougher for medium and small players.

Citing those major vendors, plus other key competitors Huawei Technologies Co. Ltd. , Nortel Networks Ltd. , and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), Koor notes: "All of these are larger than our affiliates and may have greater name recognition, broader product lines, larger customer bases, and more extensive relationship with customers, and accordingly may be better able to address an increasing trend in the industry in which service providers seek an overall telecommunication solution rather than to acquire separate products from heterogeneous equipment providers."

So Koor's getting out. It has already sold its stake in video equipment firm Scopus Video Networks (Nasdaq: SCOP) for $16 million; has been trying (unsuccessfully) to sell its 61 percent stake in Telrad Networks Ltd. ; and now wants to cash in on ECI while the vendor is performing reasonably well. (See Optibase Buys Scopus Stake, Telrad's Parent Has It on the Block, and Koor Ends Telrad Sale Talks.)

The one stake it hasn't made noises about so far is its 21.4 percent share of revenue assurance system specialist ECtel Ltd. (Nasdaq: ECTX), which reported a net loss of $2.3 million on sales of $28.8 million in 2006. But even that market has experienced consolidation that is making life tougher for the smaller players. (See Subex, Azure Complete Merger, Subex Targets OSS Giants, and Subex Azure Touts 13 Wins.)

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brain_dead 12/5/2012 | 3:06:40 PM
re: ECI in $1.2B Takeover Talks I think Its a great move from ECI management decision. Now ECI could help another Data vendors to leverage other vendor to their data/mpls products along with best breed ECI optical product/broadband product portfolio.

Seems like ECI can be well suited to merge with following available or potential vendors like

1. Cisco System

2. Motorola

Why these two??

Because both companies doesn't have any GOOD product like in optical gear as well as in broadband business. To flight with other major big player like Alcatel-Lucent , Nokia-Siemens, Huawei, ZTE, Ericsson, it will be a great move from Cisco or Motorola to go ahead with ECI Telecom.

I feel that is best combination even seen. Also ECI has some great customer in IPTV like Dutch Telecom, France Telecom , Chungwa Telecom which will help CIsco or motorola to sell IPTV solutions since both companies doesn't have any real experience as ECI telecom has.

ECI telecom's optical gear seems like rocking in APAC and Europe so it will be best suitable deal either of the party.

metroman 12/5/2012 | 3:06:40 PM
re: ECI in $1.2B Takeover Talks What a strange story.

Why would such a large shareholder make such a public declaration at this stage in discussions? If the deal is not done and it goes sour, what is the future for the company after the major shareholder has made such statements...??

If they are not competitive now, how will they be if the deal goes bad? Is this desparation, foolhardy or are they trying to attract more bidders? If you were buying from ECI or about to place an order, how comfortable do you feel now?

brain_dead - ECI have supplied access equipment to certain companies for IPTV deployments (as have many others BTW) so they have not supplied "IPTV" in the same way that they have not supplied them "internet".

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