Mr Denis O'Brien's eIsland consortium is set to sign a confidentiality agreement with Eircom, a move which allows Eircom to begin supplying eIsland with confidential information for its due diligence examination.
Intensive discussions between both sets of advisers have gone on for the past few days, but it was not until yesterday afternoon that the logjam over the issue of confidentiality was broken.
It is understood that Eircom's demand for an immediate "standstill" agreement is not now an issue, although it is likely that Eircom may press for such an agreement once the due diligence process advances to a certain stage.
It is understood that once the confidentiality agreement is in place, Eircom will begin supplying historic information that is not in the public domain to eIsland. Sources close to Eircom emphasised, however, that eIsland would have to sign a standstill agreement before key forward-looking information such as debt, cash flow and capital expenditure commitments was released for due diligence examination.
Mr O'Brien has been publicly critical of Eircom for the pace at which it was supplying his consortium with information in recent weeks.
Eircom has rejected this criticism on the basis that such information could not be supplied in the absence of a confidentiality agreement.
It is understood that confidential information will be supplied to eIsland on a phased basis. "It's an ongoing process, some information is first supplied and then eIsland will look for more information based on the first batch it got and so on," said one source.
At some stage in the process, however, Eircom - as a quid pro quo for supplying forward-looking information - will look for a standstill agreement to bind eIsland into an arrangement where it cannot go directly to Eircom shareholders or make a hostile bid if the Eircom board ultimately rejected the #1.10 per share offer from eIsland.
At this stage, all that eIsland has done is indicate what it might be willing to pay subject to due diligence.
Mr O'Brien's consortium believes that its latest approach where it may make a straightforward takeover bid for Eircom rather than buy specific assets is much more risky because it would be assuming debt and capital commitments, and that is why the due diligence examination will be crucial.
Sources said that the suggested #1.10 offer was based on certain assumptions that eIsland had made about Eircom's cash flow, debt and capital expenditure commitments. Whether the #1.10 indicative offer advances to a formal bid to Eircom shareholders, will depend on the outcome of the due diligence and also the final reaction of the Eircom board.
Meanwhile, Eircom shares fell seven cents to #2.56 as Vodafone shares fell sharply on the London market.
Vodafone fell 9p to 216p sterling - not far off a two-year low and below the 220p level at which Eircom could pull out of the Eircell sale without penalty.
Vodafone's share price yesterday values Eircell at #1.60 per Eircom share, meaning that as of this week the most Eircom shareholders could expect to receive from the proposed Vodafone and eIsland deals is #2.70 a share, compared to the #3.90 flotation price.
