The takeover of Eircom by an Australian investment fund and employee shareholders has been approved by the Competition Authority, paving the way for the €2.36 billion transaction to be completed next month.

Approval from the authority enables Babcock & Brown and the Eircom employee share ownership trust (Esot) to ask shareholders to sanction the deal and the phone company's delisting from the stock exchange at a court meeting and an extraordinary general meeting in Portmarnock on July 26th.

This procedure is seen as a formality as Babcock & Brown and the Esot already hold more than 50 per cent of Eircom between them.

The transaction is scheduled to close on August 18th.

BCM Ireland, a company formed by the bidders to make their offer, announced the approval from the Competition Authority yesterday.

The authority's scrutiny of the takeover was triggered on June 13th, when a scheme of arrangement document outlining all aspects of the deal was sent to shareholders.

A majority of the 14,400 members of the Esot voted last week to accept the takeover of Eircom.

While failure to endorse the acquisition would have prevented the transaction from taking place, Esot members had many incentives to rubber-stamp the deal.

The acquisition will increase the Esot's stake in Eircom to 35 per cent from around 22 per cent and allow its members to receive about €300 million by June 2009 in a tax-free dispersal of preference shares in the bid vehicle.

The Australian fund will own 60 per cent of the company and another, as yet unnamed, party will own 5 per cent.

Eircom's new owners plan to sell off a stake in the telecom company or float its shares on the stock exchange within the next three to five years, a circular on the deal distributed to members of the Esot has shown.