Eircom takeover speculation fanned

EIRCOM’S share price fell 12 cent yesterday to €2.09 despite persistent speculation it was a prime takeover target.

Takeover speculation was fanned further yesterday when recently-floated Australian investment fund Babcock & Brown Capital acquired a 12.5% stake in the Irish telecom group for €250 million.

It said: “We see this as a strategic shareholding in a company with robust fundamentals and a positive outlook which is not fully recognised by the market at the present time.”

The move is seen as further testament that investors in the wider market see eircom as a potential takeover target at this stage.

Reports of an indirect approach by Swisscom has put fresh focus on the Irish carrier which some analysts say is undervalued and therefore attractive to bigger companies looking to grow their revenue and income streams.

Any company contemplating eircom’s scalp will have to get the workers on side and if there is to be a buyout offer than the Employee Shareownership Trust (ESOT) will have a vital role.

They control 22% of the group and sources close to it say they will not accept cash for their shares.

Any group looking for outright control of the business will have to live with that fact, sources said.

Swisscom’s potential bid never got off the ground and eircom last week denied alleged talks.

It subsequently emerged Swisscom, which has been sniffing around for potential takeovers, made an indirect approach earlier in the year that came to nothing.

While the market believes the speculation has highlighted eircom as a takeover it is not expecting a move anytime soon, a view yesterday’s dip in the share price seems to confirm.

Up to 4% of shares were bought last week, but it is believed they were not linked to a takeover bid.

One analyst said last week’s report has put the Irish group in play but do not see an immediate bid in the offing. Eircom’s categoric denial of any talks underway is further confirmation of that.

Eircom came to market in 1999 and half a million Irish investors lost about one-third of their money as the shares slumped. There was criticism of the Government too which got the maximum return it could from the flotation at the expense of ordinary investors.

It was taken private in 2001 and returned to the market last year.

It is accepted Swisscom indicated an interest in buying the group but nothing of any substance happened. That was nine months ago, and there is nothing to prevent it again attempting a takeover.

It has a lot of money to spend and could revisit the Irish firm anytime it chooses, analysts said.