Dr Tony O'Reilly, chairman of Independent News & Media, may bid for Eircom's fixed line business in competition with Mr Denis O'Brien, the former Esat Telecom chairman.
A €2.25 billion (£1.77 billion) offer tabled by Mr O'Brien two weeks ago has yet to be considered seriously by Eircom which is concentrating on finalising the sale of its mobile arm, Eircell, to Vodafone for €5.1 billion. A takeover battle for the remainder of the business is now in prospect.
A spokesman for Dr O'Reilly said last night the businessman "had no comment to make" on his plans. The former HJ Heinz chairman and his associates are understood to be interested in acquiring all of Eircom's businesses, apart from Eircell. This would include multimedia businesses and the Golden Pages operation. Such a move would almost certainly require them to make a formal takeover offer for Eircom under stock exchange rules. No contact has been made with Eircom yet. Mr O'Brien has said he does not want to buy Eircom's multimedia assets and is only interested in a friendly deal that would not involve bidding for the entire company. If Dr O'Reilly and his group enter the fray as expected, Mr O'Brien may have to increase his bid and make an offer for the entire company.
A hard-fought takeover battle between the two camps should be in shareholders' interests as it offers the best prospect of extracting the highest price for the company. More than 450,000 small shareholders who bought the shares when the company was floated last year at €3.90 a share are still nursing significant losses. Eircom shares closed at €3.23 last night, which is slightly below the level at which they settled after the news of Mr O'Brien's bid and the Vodafone offer emerged. The shares may make further gains today as the market digests the prospect of a rival bid from Dr O'Reilly. It is understood the O'Reilly consortium does not directly involve Independent News & Media of which Dr O'Reilly owns a controlling 28 per cent. Independent is a 50 per cent shareholder in Chorus, the newly rebranded cable company which owns significant cable assets outside Dublin and has recently entered the residential telecoms market.
Independent is known to be considering selling its interest in Chorus and market sources said last night this would be compatible with a bid by Dr O'Reilly for Eircom as it would remove a significant regulatory obstacle. The Dutch-based cable-group, United Pan-Europe Communications, is understood to be the front runner to buy Chorus following the rejection of a €500 million offer from Telewest. By selling Chorus and buying Eircom's fixed line business, Dr O'Reilly would go from having an interest in a small but significant player in the telecoms market to being involved with the dominant player, according to industry analysts. Even if his bid fails he could end up holding a significant stake in the group, giving him and Independent News & Media considerable leverage going forward, according to sources.
The 64-year-old businessman is one of Ireland's richest men. The combined wealth of the former rugby star and his wife Chryss is put at £1 billion. He is considered more than capable of raising the €2.25 billion plus needed to make a bid for Eircom. Previously he has invested along with his brother-in-law, the Greek millionaire Mr Peter Goulandris, and a cabal of international businessmen. In 1998 they combined to take industrial holding company Fitzwilton private in a £135 million deal. Together with Mr Goulandris, Dr O'Reilly controls 27 per cent of Waterford Wedgwood, the luxury goods group.
Mr O'Brien has not disclosed the backers for his bid other than to say they have been co-ordinated by Chase, the US bank. Dr O'Reilly has a longstanding relationship with Bankers Trust, another US bank which has backed several of his ventures.
