Eisland has re-entered the battle to buy Eircom, upping its bid substantially by offering shareholders a deal that includes a cash upfront element of €1.32 per share. The offer is five cents higher than the bid made by Valentia, a consortium led by Sir Anthony O'Reilly, which is offering €1.27 cash per share.
EIsland wrote to the Eircom board last night informing it of its new bid. It is understood that eIsland, which is led by Mr Denis O'Brien, told directors that it had a fiduciary duty to seriously consider its revised bid.
The company confirmed it made the offer to the board last night, but that the bid was not a hostile one. It is ready to make a formal offer upon receipt of a recommendation from the Eircom board and that all relevant documentation "is in an advanced state of readiness".
The company said it also "notes 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 proposed offer". Earlier this week, Eircom extended the exclusive two-week negotiating period that it had granted Valentia to three weeks. This period was due to expire on Monday.
Valentia had indicated that both KPN and Telia, which own 35 per cent of Eircom, had given irrevocable undertakings to accept the Valentia offer. They could only break this offer if a rival bidder offered €1.355 per share or more. Eircom shares are currently trading at around €1.26 per share.
The eIsland cash offer includes a final dividend of €0.0246 per share but its participating offer guarantees €1.375 per share. It is structured as cash upfront of €1.255 per share (including the announced final dividend of €0.0246 per share) and a warrant over eIsland's ordinary share capital. In total, these warrants will have a guaranteed right to a cash payment of €0.12 per warrant, three years after the offer becomes unconditional.
The warrants would be exercisable upon flotation or sale of the company taking place at any time up to 20 years from the issue date.
In contrast, Valentia has offered €1.25 cash and warrants for 5 per cent of Eircom. It would guarantee shareholders four cents after 12 months and seven cents after three years.
Mr O'Brien described the eIsland offer as a "knock out" in terms of value to shareholders. "We challenge the board of Eircom to do the right thing and recommend the best offer," he said.
Mr O'Brien, has spent all this week at the Moriarty tribunal in Dublin answering questions about possible payments to Mr Michael Lowry, the former Fine Gael minister who oversaw the competition to award the second mobile phone licence, which went to Esat Digifone, a company Mr O'Brien founded.
It is understood that the Employee Share Ownership Trust (ESOT) and Comsource were informed of the revised eIsland offer last night. The ESOT's support has been seen as crucial in this bidding war, but no talks between it and eIsland on the revised bid have taken place. The ESOT controls 15 per cent of Eircom.
The assets which that are being bid for are the fixed -line operations of the former semi-state.
The eIsland consortium is being advised by JP Morgan and its parent Chase Bank.
The Valentia consortium comprises Goldman Sachs, Providence Equity Partners, Soros Private Equity Partners and Sir Anthony O'Reilly, chairman of Independent News & Media.
