Eircom has rebuffed a fresh approach from Mr Denis O'Brien to buy the company for €1.20 per share or €2.64 billion. The board of the company met yesterday morning and discussed the latest overtures from Mr O'Brien's eIsland consortium, which wants to buy Eircom once the sale of its mobile business to Vodafone has gone through.
EIsland had told the board's advisers - Merrill Lynch and Goodbody Corporate Finance - that it was considering making a formal offer in the region of €1.20 for the company, provided the board recommended it to shareholders. Mr O'Brien has made two previous "friendly" approaches, one pitched at €1 per share and a second at €1.10 per share. It is understood that, following talks with Eircom's advisers on Thursday, eIsland decided not to formally ask the Eircom board whether it would recommend its latest offer. Sources said yesterday this was because it became apparent to them that the board would not be in a position to do so.
Eircom shares closed up marginally at €2.53 last night, but €1.48 of the price is accounted for by the value of the Vodafone bid for Eircell, leaving a value of €1.05 on the rest of the business.
The Eircom board meeting also considered a letter from a rival consortium led by Sir Anthony O'Reilly. The letter said the grouping of four venture capital funds chaired by Sir Anthony was fully funded and had completed due diligence on all the information provided so far. The letter was intended to indicate to the Eircom board that the group - now calling itself the Valentia Consortium - was moving quickly and would shortly also be able to make an informal offer. The Eircom board would have found it difficult to recommend an offer from Mr O'Brien until it had some indication as to what the O'Reilly consortium was prepared to pay. The board would also have had trouble recommending a bid that did not have the support of the Employee Share Ownership Plan (ESOP) Trustee, which owns 15 per cent of the company.
The ESOP - which is represented on the board by Mr Dick Spring - has made it clear that it is not supporting any of the bidders. Similarly, Comsource, the Dutch Swedish consortium that owns another 35 per cent of the company and has two board seats, would also have to support any bid before the board could recommend it. A third potential bidder, Mr Dermot Desmond - who is understood to have secured the backing of UBS Warburg for his bid - has yet to make his intentions clear. All the potential bidders are likely to take stock over the bank holiday weekend before deciding on their next moves. None is keen to initiate a hostile bid as that would allow the other side to portray itself as a "white knight" if it could get the board to recommend its offer. Once a formal bid is on the table, the other potential bidders will have up to 49 days to make a counter-bid under normal circumstances.
