The battle for Esat is set to intensify further this week as the Irish telecoms company tries to secure a white knight to fight off a hostile takeover bid by Telenor.
Investors will be watching Esat's share price closely following reports that British Telecom is poised to make a counter-offer for the company.
Both US-based cable group NTL, which bought Cablelink for £535 million (€680 million) last year, and British Telecom have been mooted as possible bidders. The companies would have to trump the $85 per American depository share (ADS), which Norwegian telecoms group Telenor has bid.
Esat, which analysts say could be negotiating with up to three parties, will publish its financial results for the three months to December 31st. The "top line" results, expected to be strong, will also include the strategy details of recent acquisitions such as Kedington for £15 million.
The company's mobile phone arm, Esat Digifone, is expected to report improved financial results, including a sharp rise in consumer numbers, buoyed by strong Christmas sales, especially in the pay-as-you-go market.
Esat is also expected to outline further its arguments this week for spurning Telenor. The first closing date for accepting its bid is Friday, but it can be extended for a further two weeks. Esat will need to produce a white knight fairly quickly if the offer is to be improved.
Esat and Telenor do not enjoy a good relationship, although both are 49.5 per cent shareholders in Digifone. Telenor is said to be sceptical about a white knight, but analysts say it had been a bit early for one to appear.
A newspaper report yesterday said British Telecom was set to bid $95 per share for Esat, quoting a BT source which said discussions were at an advanced stage and a draft offer document had been prepared.
BT operates in the Republic through Ocean, a joint venture with the ESB. The ESB spokesman declined to comment on the report last night.
It is understood, however, that the shareholders' agreement precludes BT from operating as a telecoms company in the Republic, except through the joint venture. Observers said yesterday this was unlikely to be insurmountable.
An Esat spokeswoman said Esat was talking to other parties about getting an alternative offer for the company. She said she could not confirm whether it was in discussions with BT.
The Irish Takeover Panel is expected to ask BT or Esat to make a statement clarifying the position. BT's Dublin representative was unavailable yesterday.
Analysts said BT's reported involvement may put pressure on other possible bidders to decide whether to make an offer. One source said such an offer could end up being a combination of shares and cash.
Telenor declined to comment on the BT report last night. Its position is that its offer is the only one on the table and is a good offer. Obviously any counter-bid would force Telenor to increase its offer or abandon it on the grounds that Esat has become too expensive.
Meanwhile, Esat Telecom has convened a shareholders' e.g.m. for January 25th to approve a $2.5 million bonus and the granting of 400,000 ordinary share options to its chairman, Mr Denis O'Brien. The package comes into play if Mr O'Brien secures more than $1.1 billion for the sale of Esat. (At present, the Telenor offer values Esat at $1.9 billion.)
The options were granted at £19.38 per ordinary share (one ADS equals two ordinary shares). But they are worth considerably more now, up to $7 million more based on Telenor's offer of $85 per ADS. The options were formalised on December 4th. The Telenor bid was announced on December 1st and Telenor raised the bonus and options issue with the Irish Takeover Panel, claiming that it amounted to "frustrating action". Esat rejected this, but said that following discussions with the Takeover Panel, it would convene the e.g.m to approve the package.
