ESAT Telecom shares tumbled yesterday, then recovered, after Sweden's Telia and Norway's Telenor abandoned their merger in a bitter dispute. The combined Scandinavian company had made a €1.58 billion (€1.55 billion) bid for Esat, valuing the Irish company at $72 a share.
Even after news of the rupture, Esat stock was still trading well above this level. Analysts said this indicated some investors believed a better offer for the company may still emerge. Esat closed last night on the Nasdaq at $78, down almost 5 per cent.
Neither Esat nor "Newtel", the temporary name for TeliaTelenor, could say last night whether the bid was still on the table. Technically, the offer was made by Newtel Ireland, a wholly-owned subsidiary of the merged company. It is understood that because "Newtel" still has a legal identity, Telia and Telenor would need permission from the Takeover Panel here to lapse the deal.
Although 60 per cent of Newtel Ireland is owned by Telia, the driving force behind the offer for Esat was Telenor, which already owns 49.5 per cent of Esat Digifone. Telenor may still wish to buy Esat, but lawyers speculated last night that for the existing offer to remain in place, the Swedish company would have to co-operate by transferring the ownership to its estranged Norwegian partner.
Telia also owns 14 per cent of Esat's rival Eircom, which it has decided to sell. It is unclear whether Telia will now proceed with the sale.
News that the $47 billion (€46 billion) merger was to be reversed came after more than a week of tension, with the board of the new company splitting along national lines.
The issue that proved most controversial centred on where to site the group's prized mobile telephone unit. The Norwegian side argued that Oslo was the best location, but the Swedes insisted on a facility outside Stockholm.
There was further controversy when the Norwegian chief executive Mr Tormod Hermansen, tried to beat up a journalist in an Oslo street. He later apologised, claiming he thought the journalist was a mugger. Yesterday evening, the Prime Minister of Norway, Mr Kjell Magne Bondevik, said the deal had collapsed.
The companies signed the merger agreement in October; had it gone through on January 1st as planned, it would have created Europe's sixth largest telecom.
The company, owned 60 per cent by Sweden and 40 per cent by Norway, was planning to hold Scandinavia's biggest public offering next April, selling about 20 per cent of the shares but with the governments keeping a controlling stake until 2015.
Newtel Ireland issued a terse statement last night, noting that the merger of Telia and Telenor was to be terminated.
"Guidance is being sought from the appropriate authorities on the consequences, if any, of this development for Newtel Ireland's offer for Esat. A further statement will be made in due course," the company said.
In its own statement, Esat said: "If Newtel's offer for Esat is to remain in place, the board of Esat continues to believe the offer undervalues the company and advises shareholders to take no action."
Some industry observers interpreted these words as falling somewhat short of a rejection of any future bids, by the Norwegian firm or others. Last week, Esat said it had received "a number of approaches from third parties", but did not name these.
