Eisland, the consortium led by Mr Denis O'Brien, has increased its offer for Eircom from €1.20 to €1.241 per share, valuing the company at €2.74 billion (£2.16 billion). The group announced last night that it had submitted a new proposal to the board of Eircom following a week of intensive negotiations. EIsland is now seeking the board's backing and asked it to consider the fresh offer "as a matter of urgency".
Eircom shares closed at 118 cents last night ahead of the eIsland announcement. The Eircom board is due to meet on Tuesday and a response is not expected until after the meeting. A positive recommendation would "be in the interests of all Eircom plc shareholders, employees and customers", said eIsland. The new offer values each original Eircom share at €2.62, compared with a flotation price of €3.90.
Valentia, a rival consortium of venture capital houses chaired by Sir Anthony O'Reilly, was considering its position last night. Valentia's initial bid, also lodged earlier this week, was slightly less than eIsland's opening bid of €1.20. It is expected to respond with an increased offer in the coming days. Two other potential suitors, Mr Dermot Desmond's International Investment & Underwriting and Kohlberg Kravis Roberts, the US buyout specialist, have yet to show their hands but are staying in touch with the process.
The new offer from eIsland includes an offer to pay 2.1 cents in lieu of the dividend due to Eircom shareholders this year in respect of the year to March 2001. The consortium said last night that its offer was the best cash price available to all shareholders.
EIsland also confirmed that it was prepared to offer the Employee Share Ownership Trust (ESOT) 24.9 per cent of the company, an increase of 10 per cent on its current stake. The mechanism by which the ESOT will increase its stake was not outlined. All the potential bidders have been courting the ESOT in recent days and eIsland will meet the trustees and their advisers this weekend. A 25 per cent stake is understood to be the minimum set by the ESOT before it will consider supporting a bid.
By keeping the ESOT's stake below 25 per cent the O'Brien consortium will be able to push through special resolutions in the privately owned entity that will succeed Eircom. However, the ESOT is likely to look for various safeguards in a new shareholder's agreement. Mr Con Scanlon, the general secretary of the Communications Workers Unions and the ESOT's lead negotiator declined to comment last night on the negotiations.
The O'Brien led group said last night it was "led by the best management team in the Irish telecoms industry with a clear plan to re-introduce revenue and business growth to Eircom". The group has been chasing Eircom since late last year when it first offered €1.00 per share. It then increased its offer to €1.10 and after a false start last month made a third offer at €1.20 on Monday.
Eircom confirmed last night it was considering the eIsland proposal.
