Written by: Zack Miller | August 8, 2007
It’s been interesting to watch what’s been going with ECI Telecom (ECIL). As we wrote recently, ECIL, a leading telecommunications equipment manufacturer, has received a bid on the company by the Swarth Group & Ashmore Management consortium, headed by Shaul Shani at $10 per share.
Long story short: the stock stayed propped up near the $10 mark while news of a second bid emerged and then evaporated. As the deadline for counter-bids came and went, the stock traded down to 9.13 only to see it trade up to today’s level or so of 9.34, still an almost 7% discount off of Swarth’s bid of $10.
Why the discount you ask?
Well, I’d posit two reasons:
Transaction Risk: In his research note, Jefferies analyst George Notter pointed to a lack of detail around Swarth’s debt financing plan for the transaction. “Given macro concerns on the debt/LBO environment,” he writes, “it’s possible there may be some risk to Swarth’s anticipated debt financing plan for acquiring ECI. Credit markets are shot: Read Barry Ritholtz’s recent article for a flavor of the pain and see Phil Davis’ article on why the brokers are the new homebuilders.
Repricing Risk: It may be entirely possible that the deal gets repriced. If Shaul Shani’s Swarth Group is having trouble pulling the pieces together and in “light” of the recent Light Reading article explaining that no less than 11 firms have already passed on acquiring ECIL, it’s foreseeable that the deal gets done, just at a lower price.
That’s the leverage I’d be using if I were Swarth.
Disclosure: Author’s fund is long ECIL as of 8/8/07
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Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC. and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email zack@profile-financial.com
Written by: Aaron Katsman | August 8, 2007
By Aaron Katsman
IsraelNewsletter.com
With the recent global market volatility, investors have headed for cover, manifesting itself in a huge run up in US Treasury bonds, UK Gilts and other government debt. One country which didn’t experience this phenomena was Israel. Local government fixed rate bonds got hammered, losing more than 6% in the span of a week.
Why did this happen?
Starting in mid-July, foreign investors dumped more than $603 million in short-term Makam bonds, the Israeli equivalent of T-bills. Sensing that Bank of Israel Governor, Stanley Fischer, was going to start raising interest rates, which he did, after signs of inflation were starting to pick up, foreigners ran for the exits.
This shouldn’t have come as a surprise. As I have posted, underlying inflation in Israel has been surging, while the CPI number has been showing muted inflation because of the weakness in the US Dollar. Now that the USD has strengthened, look for continued interest rate hikes, resulting in more downward pressure on Israeli Government debt.
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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.
Written by: Zack Miller | August 8, 2007
Lots of earnings reports. Let’s jump right in.
Reported this week:
MTS (MTSL)
Allot Communications (ALLT)
Top Image (TISA)
Pharmos (PARS)
Audio Codes (AUDC)
Cimatron (CIMT)
Alon USA (ALJ)
NDS (NNDS)
Delek (DK)
Orbotech (ORBK)
Syneron (ELOS)
Jacada (JCDA) reports and signs “material deal” in North America
Other Important News about Israel and Israeli Companies
Optibase (OBAS) raises tender offer for Scopus (SCOP) shares
Court grants Heftsiba protection from creditors
Written by: Aaron Katsman | August 7, 2007
By Aaron Katsman
IsraelNewsletter.com
While James Cramer was in the midst of his meltdown this week, one of his favorite stocks, Syneron(ELOS), came through with great earnings. As I have mentioned after their last report (a refined way of bragging), the company has gone from much hyped with little to show, to a serious company that is executing their business model efficiently. Syneron designs and sells medical products based on their own proprietary Electro-Optical Synergy, or ELOS technology. They promote their non-invasive procedures, like wrinkle reduction, hair removal, and skin rejuvenation. If all the global warming hysterics are right, just business from wrinkle reduction generated from sunburns will mean huge profits for the company.
Back to reality, this was a strong quarter for the company. CEO Doron Gerstel said, “Syneron’s sales continue to rise at a significantly higher rate than the growth of the market.” He went on to add,”In the second half of the year, we believe that the superior results of ELOS technology, as well as our unique customer care approach, will further strengthen Syneron’s position as the clear leader in our medical-aesthetic market segment. We are, therefore, increasing our guidance to $146 million, which is 25% revenue growth for the full year of 2007, from our prior guidance of 20% revenue growth for 2007.”
As baby boomers continue to age (say it ain’t so) with their high levels of disposable income, there is no question that they are looking for ways to recapture their youthful appearance. Syneron is poised to provide that solution and as such, make it a very interesting long-term baby boomer play.
Please see our Disclaimer HERE.
Disclosure: Author’s fund is long ELOS as of 8/07/07.
Like what you see? Sign up to receive daily updates from IsraelNewsletter here
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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