The entry of Sir Tony O'Reilly and Mr George Soros into the fray offers the prospect of an end to the five-month phoney war over Eircom. Overtures have already been made by two consortiums, one led by Mr Denis O'Brien and the other by Mr Dermot Desmond, but no formal bid has yet been made for the rump Eircom business once the sale of Eircell goes through next month.
The publication last week of the terms of Vodafone's €3.6 billion (£2.84 billion) offer for Eircell would appear to have been the catalyst for the consortium, than involves Sir Tony, to make its move. The documents contained only a limited amount of new financial information, but did give details of how Eircell would be de-merged from Eircom. Prospective purchasers could - for the first time - get a clear picture of what would be left after the sale of the mobile business in terms of assets and resources.
Mr O'Brien's eIsland consortium had been awaiting the publication of the documents and had been expected to outline its bid this week. An indicative offer of €2.2 billion made by the businessman last November was rebuffed by Eircom before it ever got off the ground. At the time Mr O'Brien said it was a friendly offer and that he had no intention of making a bid that did not have the backing of the board.
He has also said that he believed his offer was fully priced. Subsequently eIsland pointed out that the continued fall in the valuations of telecoms stock over the past few months made the offer even more attractive.
It now appears - according to reports in this morning's Financial Times - that Mr O'Brien has changed tack and will make a hostile bid without the backing of the Eircom board.
The consortium linked to Sir Tony seems to be gambling on a hostile bid from Mr O'Brien which will allow it pitch itself as the white knight and may already have made tentative approaches to key shareholders. This tactic makes sense as a bid for the fixed-line business is unlikely to succeed without the backing of the Employee Share Ownership Trust - which owns 15 per cent of the company - and the small shareholders who own another 15 per cent. Painting yourself as a white knight who has been welcomed in by the company board to fight off a hostile bid would give you a considerable advantage.
There is one obvious flaw. As Mr O'Brien has yet to make his bid - hostile or otherwise - the O'Reilly consortium's plan seems a little premature. The former Esat Telecom chairman has been down this road in the very recent past and it is hard to see Mr O'Brien falling so neatly into such a trap. There is also an unknown quantity in the form of Mr Dermot Desmond. The financier has sought information from Eircom's advisers but has given no indication about how serious he is about a bid. He may now show his hand.
The prospect of a three-way fight between three of Ireland's most successful businessmen is one that Eircom shareholders can relish. The only offer on the table so far is Mr O'Brien's indicative offer of €1 per share, which values the company at €2.2 billion excluding debt. Sir Tony's offer is expected to be in the region of €2.6 billion including debt. Given Eircom's relatively low debt levels the O'Reilly consortium's opening offer looks like it will not be far off the €1.30 plus level that Eircom's advisers have indicated is needed before serious talks can begin.
It looks like it will be an interesting week for Eircom shareholders.
