The Eircom board will meet tomorrow morning to consider the outcome of the first stage of the bidding process for the fixed-line telecoms company.
Indicative offers for Eircom are expected by 5 p.m. today under the deadline set by the company following the sale of Eircell to Vodafone. Bidders have been asked to make an offer showing the price per share, the financial resources/arrangements underpinning the offer and any arrangements with regard to the Employee Share Ownership Trust (ESOT).
Four parties have indicated interest in the fixed-line telephone operation - the eIsland consortium led by Mr Denis O'Brien, the Valencia consortium chaired by Sir Anthony O'Reilly, Mr Dermot Desmond's International Investment and Underwriting and US buyout specialists Kohlberg Kravis Roberts.
Through the weekend, the trustees of the Employee Share Ownership Trust held meetings with potential bidders to tease out proposal details following presentations to the trustees last week. The support of the ESOT, which has a 15 per cent stake in Eircom, will be crucial to a successful bid - which requires the approval of shareholders representing 80 per cent of Eircom shares. It is understood that KKR has not had any meetings with the ESOT, and while it has written to Eircom staying its interest, it is not clear how firm its intentions are at this stage.
Weekend reports that Microsoft Corporation had been invited by the Department of Public Enterprise to get involved in the bidding were dismissed by a Department spokesman. "The Department is not in the business of touting for someone to purchase Eircom," he said.
Confusion could have arisen from misreading the intentions behind a telephone call to Microsoft chairman Mr Bill Gates, he explained. Mr Gates was contacted by the Department to ascertain if Microsoft was interested in using the Irish market to test new broadband high speed technologies, he said.
The spokesman accepted that if Microsoft wanted to use the Irish market as a test market the Eircom customer base would be attractive, but he said any vehicle or strategic alliance Microsoft used would be a matter for the US group.
Eircom could receive three bids by close of business today, in a range of €1.20 to €1.25 (£0.95£0.98) per share. But market sources have suggested that some potential bidders may wait to show their hands in a game of cat-and-mouse.
While today's deadline has been set by Eircom to remove the uncertainty hanging over the company, failure to bid by today would not prevent an interested party from entering any bidding contest in coming weeks. A company and its advisers can set a timetable, but under the rules of the Irish Takeover Panel, new bidders can come in with better offers during a sale process.
The Eircom board will have to assess tomorrow if any of the indicative offers are acceptable, and if it can proceed to open detailed negotiations with one preferred bidder. It could decide that none of the offers adequate and abandon the process to sell the company - or it could ask the bidders to improve their offers.
"Everyone has been smoozing with the ESOT and Mr Con Scanlon is seen as the kingmaker in this deal. But I don't expect the ESOT to come down in favour of any one party before or even during the first round," a source close to one consortium maintained. "ESOT needs to tread carefully to ensure it does not choose a partner it can't dance with," he added.
The ESOT requirements are different from those of other shareholders. For the ESOT, the price per share offered is not as important as the plans of the bidders for the development of the company and the long-term protection of jobs. The ESOT wants to increase its stake from the current 15 per cent to 30 per cent. As it will be a share buyer rather than a seller, a lower price with the right business plan could prove more attractive.
