A sweet heart deal?

    Given the lack of interest in the first round of being shopped, it should come as no surprise that ECI might not receive an alternate bid during its 30-day go-shop period. However, some analysts believe Swarth received a "sweetheart deal" for the company, based on IDB Group 's interest in cashing out and relationships Shani has with some of ECI's directors.

    It is worth noting that two of ECI's directors -- Avi Fischer and Raanan Cohen -- also serve on the board of Brazilian telecom firm GVT , where Shani is also a director.

    Fischer serves as executive VP of IDB, deputy chairman of IDB Development Corp., and joint-CEO of Clal, which is a subsidiary of IDB. Cohen, meanwhile, is CEO of Koor Industries Ltd. , another IDB property. IDB, through Koor, Clal, and other entities, holds a 41 percent stake in ECI.

    While ECI maintains these relationships are not considered "personal interests" in the merger, Fischer and Cohen did not participate in the merger's approval process.

    ECI down graded

    With the company's go-shop period over, analysts have downgraded the company's shares due to limited upside in terms of price and possible risk associated with financing of the Swarth deal.

    Yesterday, analysts at Citi group and Jefferies & Company Inc. downgraded the stock from Buy to Hold and lowered their price targets to $10 to match the value of Swarth's bid.

    In his research note accompanying the downgrade, Citigroup analyst Mike Genovese wrote, "We expect the acquisition by Swarth Investments to close at $10, although we believe the price is a significant discount to peers."

    But some analysts still believe there is a slight risk involved in the transaction. 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."