Swiss firm makes bid for Eircom

EIRCOM is expected to throw open its books to Swisscom within days after the Swiss fixed-line leader emerged as the mystery bidder for the company last night.

Sources close to the deal said talks between the two companies were still at an early stage, but that Swisscom would soon begin an analysis of Eircom’s finances.

Swisscom’s interest is understood to be tentative, however, as it is also examining other potential acquisition targets in Europe. It has previously been linked with fixed-line operators in Denmark, Austria and the Czech Republic and recently concluded a deal with a broadcasting company in Hungary.

Some analysts said other phone companies, such as Deutsche Telekom, could spark a bidding war if they entered the battle for control of the company over the coming days.

Eircom shares surged 15% yesterday, adding over €330 million to the company’s value, after it told the stock exchange it had received a preliminary approach regarding a possible takeover. But it did not identify the potential buyer. Yesterday’s announcement was triggered by hectic morning trading in Eircom shares. The share price had already risen 10% between the weekend and close of business on Tuesday, but yesterday’s trading brought the gain for the week to 25%.

The statement said: “The board of Eircom notes the recent share price movement and confirms that the company has received a preliminary approach from a potential offer or that may or may not lead to an offer being made for the company. A further announcement may be made in due course as and when the need arises.”

Eircom had already been suggested as a possible candidate for Swisscom’s hit-list but it went public last month to deny reports talks between the two companies were in progress. The markets drove up the share price by 10% when initial reports of Swisscom’s interest emerged, but these gains were reversed when Eircom issued its statement.

Interest in Eircom was renewed within days when it emerged that Babcock and Brown, an Australian investment firm, had built up a 12.5% stake in the company. It said Eircom had been undervalued by the markets.

The firm 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.”

Yesterday’s share price rise added €40m to the value of its original €215m investment.

Eircom employees stand to be the biggest winners from yesterday’s developments.

The employee trust that holds almost 22% of the company saw the value of its investment jump by over €70m, which amounts to around €5,000 for each of the 14,000 current and former employees it represents.