EIsland is expected to meet the Employee Share Ownership Trust (ESOT) which holds 14.9 per cent of Eircom within the next day or so, in an attempt to win its backing.
It is understood also that rival bidder Valentia is to hold further talks with Comsource, Eircom's biggest single shareholder with 35 per cent, to try to convince it to continue supporting its bid. Comsource signed legal guarantees supporting Valentia's bid unless another bidder offered more than €1.355 per share. EIsland's latest bid is worth €1.36 per share.
The ESOT is currently balloting on an offer by Valentia to buy Eircom. The ESOT's trustees wrote to eIsland yesterday seeking clarification on several points of its offer.
Last night eIsland chairman Mr Denis O'Brien insisted its offer was in the best interests of employees. He said it was structured so that the ESOT would only have to reinvest €180 million compared to €361 million under the Valentia proposal to buy 29.9 per cent of the new Eircom. He added the ESOT would also get €447 million for its shares from eIsland, while it would only get €411 million under the Valentia offer.
Mr O'Brien added that with eIsland, ESOT members would get €20,800 each (from the trust) and only €5,000 under the Valentia proposal.
The ESOT has also expressed concerns about the amount of debt to equity eIsland would have, arguing that the bid was too highly leveraged. EIsland advisers said this had altered considerably as part of the new bid. Mr O'Brien said eIsland's new offer had debt/equity ratios of 72/28 per cent, whereas the Valentia offer was 71/29 per cent. "The difference is minimal," he added.
He said that the eIsland proposals to the ESOT would be written down with detailed guarantees before being voted on by the ESOT.
The extent of the task facing eIsland in trying to win over the ESOT was underlined yesterday when the ESOT chairman, Mr Con Scanlon, told RTE that "you're talking peanuts" in the difference between Valentia's 1.27 cash offer and the eIsland offer and indicated that he was continuing to strongly support Valentia. The Valentia offer also includes warrants - effectively promises of payment at a future date - which would bring it up to €1.32 per share.
An ESOT source said the short-term payout from its funds (€20,800) was actually money belonging to the employees.
Valentia issued a statement yesterday saying it was assessing eIsland's bid and urged shareholders to take no further action in the meantime. Once the eIsland offer is declared formal, Valentia has 14 days to match it or trump it.
Sources said Valentia would seek to persuade Comsource that it had a deal that was attainable and expressed confidence that the ESOT would not switch sides. However, a venture capital source suggested that now the Eircom board had withdrawn its recommendation in favour of Valentia's offer, trying to make the offer stick could constitute a hostile bid.
Dutch telecoms group KPN which holds 21 per cent of Eircom, as part of the Comsource joint venture with Telia, said it was "not unhappy" with eIsland's improved offer. Telia declined to comment.
Meanwhile, a spokesman for Independent News & Media said the group, which holds 4 million shares in Eircom, had bought them last October. They were bought as part of a share portfolio which Independent holds, he added. Mr O'Brien described the stake as "strange".
