It was always on the cards that another bidder could enter the frame for Eircom but few expected eIsland to make such a fast comeback. Its chairman, Mr Denis O'Brien, gave no indication that he would go toe to toe again when Eircom granted Valentia exclusive negotiating rights for two weeks from June 11th.
Mr O'Brien had taken a low-key approach, saying only that eIsland accepted the reality of the situation that the Eircom board had entered into an exclusive period of negotiations with another bidder. It seemed then that the consortium wasn't going to make another bid.
The parties had been asked by Eircom to submit final bids before the June bank holiday weekend. It dithered over the offers during that weekend.
EIsland was adamant its bid was higher and that the Eircom board should recommend it. Valentia, meanwhile, had done some nimble footwork, managing to cultivate the ESOT (the employees' trust), which holds 14.9 per cent of Eircom. Winning its support was always seen as crucial to a successful bid because it was felt the directors would not recommend an offer that was opposed by employees.
That situation may not have changed but eIsland's new offer puts significant pressure on Eircom and the ESOT to consider it seriously. To take over Eircom, a successful bidder needs 80 per cent of the company, a virtually impossible target without the ESOT's support.
For Mr O'Brien and his consortium, this is their eighth Eircom bid, having initially signalled an interest in the former semi-state last year. Eircom stalled for months, citing the impending deal with Vodafone as a reason for the delay.
EIsland now sees an opportunity to re-enter the frame. It is said it was partly prompted by what it felt were delays by Valentia in getting the deal to the finish line - and it felt upping the ante considerably could win the day.
It has been reported that Comsource - the KPN/Telia group that owns 35 per cent of Eircom - has given irrevocable undertakings to accept the Valentia bid. This undertaking can only be broken if another bidder offers €1.355 per share.
It is understood eIsland believes the undertaking only becomes irrevocable once a firm offer is made. This has not yet occurred but it was thought that the offer document to Eircom shareholders would be published by next Monday.
It is also understood eIsland asked the Eircom board for copies of the Comsource undertakings but did not get them and also sought details of the exclusive negotiating agreement with Valentia but, not surprisingly, did not get them either.
EIsland clearly believes that by making a higher offer it can put pressure back on Valentia and try to draw matters to a speedy conclusion. It said it noted with surprise "the ongoing delays in the negotiations between Eircom and Valentia, and believes all Eircom shareholders should benefit from the clearly superior economics and speedier execution potential of the eIsland offer proposed".
One aspect of eIsland's new offer that differs from its previous one is that it is offering a guaranteed payment of 12 cents per share in three years if shareholders take the lower cash-with-warrants offer. Previously, it had offered six to 12 cents, in the event of a takeover, while Valentia had offered a definite four cents after 12 months and seven cents after three years.
One thing is certain - the Eircom board is in for another weekend of soul-searching and number crunching.
