Swisscom confirms eircom approach

EIRCOM shares continued their fall from grace yesterday, falling for the third day in a row as Swisscom finally owned up to being behind last week’s takeover approach.

Eircom closed at €2.31, 6% off the €2.45 peak reached when news of the approach was made public, as investors and analysts continued to show little enthusiasm for the €2.6 billion deal that would value eircom at around €2.41 per share.

A Swisscom statement said: “Swisscom confirms that it has entered into discussions with Eircom in relation to a possible transaction. However, there can be no certainty that an offer will in fact be made. A further announcement will be made when appropriate.”

The news received a cool reception from Swiss investors, who drove Swisscom shares down 0.7% on the Zurich stock exchange yesterday.

Swiss investment bank Vontobel came out against the deal, saying it made little strategic sense. Vontobel analyst Panagiotis Spiliopolous said eircom was experiencing the same difficulties as those faced by Swisscom in its home market, with a declining fixed-line market and competition that was getting stronger and chipping away at market share.

“There’s not much there in terms of synergies,” he told the Swiss Broadcasting Corporation yesterday.

Swisscom will announce third-quarter results today and was understood to have been under pressure to clarify its position on eircom to allow investors to digest the details of the results.

The company also said yesterday that Eircom was one of a number of investment opportunities it had looked and that it reviewed potential deals “on a regular basis.” Swisscom is in the running to acquire Danish fixed-line leader TDC, which is valued at around €10bn, but it is up against two heavy-hitting private equity groups and is considered an outside bet in the race.

Eircom agreed earlier this week to allow Swisscom two weeks to examine its finances in detail.

The company also agreed to deal with Swisscom exclusively, shutting out other potential bidders, for a limited period.