For ECI Telecom the Clock is Ticking
Written by: Aaron Katsman | July 30, 2007
By Aaron Katsman
IsraelNewsletter.com
ECI Telecom (ECIL), a leading telecommunications equipment manufacturer, has another 24 hours to find another buyer with a better offer or else be acquired by the Swarth Group & Ashmore Management consortium, headed by Shaul Shani. Either the company is keeping its cards close to the vest, or no buyer has emerged. If an alternative buyer isn’t found then Swarth & Ashmore will purchase ECI at $10 per share.
When news of a potential alternative buyer surfaced the stock jumped a bit, but it sure seems that the market doesn’t believe they will succeed in finding another purchaser. That being said, getting sucked into the global selloff of last week, ECI stock is trading in the $9.35 range, about $0.50 less than it was trading just two weeks ago. Either the market doesn’t believe the Swarth deal is going to go through either, or there is a nice trade that would yield over 6.5% net until the deal closes. The company announced an extraordinary general meeting of shareholders for August 29, where, among other issues, a vote on the merger will take place. I haven’t heard any information to indicate the acquisition won’t be approved. In fact after speaking with some merger arbitrage hedge funds who see this opportunity, this seems like a “no brainer.”
I think that the market is mispricing ECI currently, and if you are looking for an interesting bet until the end of the year, this is a good opportunity.
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Disclosure: Author’s fund is long ECIL as of 7/30/07.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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