ESOT and Babcock make Eircom bid

THE Eircom employee share ownership trust (ESOT) has teamed up with Babcock and Brown to launch a bid for the telecoms company.

The ESOT is the second largest shareholder in Eircom after Babcock, an Australian investment house.

It is understood that the two have put in an offer of €2.20 a share to Eircom.

While the price is above this week’s close for Eircom, it is significantly lower that the price Swisscom was prepared to pay for Eircom just before Christmas.

An offer of €2.20 per share would value Eircom, excluding its massive debt pile, at around €2.3 billion. The cash offer would also include the 5.2 cent per share dividend Eircom intends to pay out.

If a formal offer does emerge, it would almost be certain to succeed, given the size of the stakes held by Babcock and the ESOT.

Babcock has spent the best part of €700 million acquiring a 28.8% stake in Eircom, while the ESOT owns 21.8%, giving the two more than the 50% required to take control. To remove Eircom from the stock exchange, the bidders would have to own more than 80% of the company.

“As the representatives of over 95% of Eircom staff, it is not unreasonable to expect that any potential buyer would treat the trade union group as a key stakeholder and thus engage with us,” CWU general secretary Steve Fitzpatrick said.

“Unless the CWU receives the assurances it requires from Babcock and Brown regarding its intentions, should it purchase the company, we will have no choice but to deem this purchase hostile to the long-term interests of our members in Eircom.”

If the company is taken over, it will be the fourth time in less than seven years that Eircom has changed hands.

The company was privatised by the Government in 1999. Nearly half a million Irish people bought shares in the company at the time, thought they are still feeling the cost of that investment after Eircom’s share price collapsed.

In 2001, a consortium fronted by Tony O’Reilly and backed by investment guru George Soros won control after a battle with Denis O’Brien.

The O’Reilly consortium launched Eircom back on to the stock market in 2003.

The company has since bought mobile phone operator Meteor for €420m.

It is thought that if Babcock are successful, it plans to split Eircom into two separate businesses - one managing the telecoms network and the other comprising of its retail activities and Meteor.