Eircom was within days of being sold to Deutsche Telekom last summer when the German group's share price collapsed, scuppering the deal.
"The deal was as near as possible to being closed but the world at large changed and the whole telecoms sector changed.
"Since it was a paper-based deal, the drop in the paper of our potential partner, which was enormous, effectively scuppered the deal," said Mr Kane in an interview published today in Business This Week.
Mr Kane declined to identify the bidder, but other sources confirmed it was the German telecom giant.
"It was not a lack of desire, not a lack of strategic fit, not a lack of a good solution, it was simply the fact that the value of the other company fell," said Mr Kane, who steps down at the end of the month but will stay on as consultant to the group for at least one year.
The price at which the sale was originally negotiated would have been at a significant premium to the then Eircom share price of around €3.50 and not far off the flotation price of €3.90, said Mr Kane.
Shareholders who bought in at the flotation are now nursing losses of around €1 per share after the break-up and sale of Eircom this year.
Mr Kane is adamant that walking away from the Deutsche deal was the correct decision because of the fall in the value of its stock.
The German group's shares have fallen from around £40 sterling (€64) in mid-2000 to £12 sterling now.
"The negotiations were at a fairly advanced stage around what I call envelopes. But with the dramatic fall in the share price, even the top of the envelope did not equate to a deal that I could go to the board with and say represented good value," he said.
It is understood that Mr Kane and Eircom chairman Mr Ray MacSharry visited Deutsche Telekom's headquarters in Bonn twice to discuss the terms of what Mr Kane described as "a deal made in heaven".
A takeover would have resolved the issue of the 35 per cent stake held in Eircom by Comsource, a consortium of the Dutch telecom company KPN and its Swedish counterpart, Telia.
Comsource's indecision about whether or not to sell its stake was, by mid-2000, starting to hamper his ability to manage the company, said Mr Kane.
The deal would also have resolved the question of the future of Eircell, the group's mobile operation.
Mr Kane subsequently sold the company to the British mobile giant Vodafone because he did not think it could survive as a small independent player.
The rump of Eircom was bought by Valentia Telecommunications, a leveraged buyout consortium, last month.
Friday Interview: page 5
