Eircom's directors are likely to give the go-ahead within days for due diligence examination of its books by Australian investment fund Babcock & Brown and the employee trust which have made a joint approach for the telco, writes Arthur Beesley, Senior Business Correspondent
Trade union resistance to a deal receded yesterday when the head of the Communications Workers' Union (CWU), Steve Fitzpatrick, said he had "less reason to be disturbed" at the prospect of a takeover after a meeting yesterday with Babcock & Brown.
It cannot be automatically assumed that due diligence will not uncover any issues but the latest examination of Eircom's books is not expected to uncover any surprises. Swisscom carried out due diligence on Eircom as recently as November and it was ready to table a bid before the Swiss government blocked a deal.
Even though a full bid from the Australians and the trust is increasingly likely, they are not expected to move until their own examination is concluded.
As part of that process, Babcock & Brown is likely to hold discussions with Eircom's top management. While some of the most senior managers at Eircom are likely to leave the telco if it is sold, discussions have not yet reached that point.
Only on foot of a formal offer would Eircom's board decide whether to recommend an offer. Such a recommendation is likely given that a deal at €2.20 per share would represent a 48 per cent return on the €1.55 per share investors paid in its 2004 flotation. Shareholders also stand to receive a dividend of 5.2 cent per share.
The value of the proposed deal is significantly below a price of more than €2.40 per share mooted by Swisscom. However, a deal would be structured in a way that would enable members of the Employee Share Ownership Trust (Esot) to avoid big tax bills by receiving guaranteed preference shares in the company after its sale in return for their 21.5 per cent stake.
Mr Fitzpatrick, who on Friday said he was "disturbed" by reports of an imminent bid, adopted a conciliatory tone after yesterday's meeting. "If we were to take what they had to say on face value, we have less reason to be disturbed," he said.
However, he remained concerned about the viability of Eircom's retail unit if it was separated from the network division, as mooted by Babcock & Brown. "We have raised those questions and we're looking forward to a further engagement to see whether we can get answers.
"The meeting was both cordial and constructive. Given that this was an introductory meeting, it would be premature to suggest that we are satisfied that we have received the type of assurances we require with regard to the future of Eircom, should it be acquired by Babcock & Brown."
The CWU is likely to meet this week with the Esot, which has agreed a "joint proposal" with the Australians. Between them, the Esot and Babcock & Brown control 50.3 per cent of Eircom.
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