Eircom denies takeover claims

EIRCOM yesterday rubbished a claim that it is in talks with Swiss telecoms company Swisscom that would see the former State-owned monopoly taken over for €3 billion.

Shares in eircom surged 13% yesterday morning after the Irish Independent, which is owned by eircom chairman Tony O'Reilly, said Swisscom had made an informal takeover approach and that talks were ongoing.

But the gains were immediately trimmed back to 6% after the company told the stock exchange the paper was incorrect. The share closed 10% higher.

"Eircom notes this morning's press speculation concerning a possible approach from Swisscom," the company said.

"The company confirms that it is not currently in discussions with that company or any other in relation to a possible offer."

An eircom spokesman declined to give any further comment, while Swisscom also remained silent.

A valuation of €3 billion would have represented a 38% premium on eircom's market capitalisation at the close of business on Wednesday, a figure described by Davy Stockbrokers analyst Jack Gorman as "sizeable."

Mr Gorman also said eircom was an attractive takeover target and the recent €420 million acquisition of mobile operator Meteor had increased its sale prospects.

"Given the hectic pace of merger and acquisition activity in the sector at present, and the existing cash-flow and now mobile attractions of eircom, an approach for the company is not a massive surprise," he said.

"It is also of a size that would not be too big for European telco incumbents, given their own de-leveraging balance sheets and free cash generation."

Swisscom is the fixed-line incumbent in Switzerland and has already expressed an interest in making acquisitions elsewhere in Europe.

The Swiss government has a 66% stake in the company. Mr Gorman said that telecom companies with no State involvement would be top of Swisscom's list and eircom fitted the bill "perfectly."

The company has already been unsuccessful in its attempts to take stakes in the number one fixed-line operators in Austria and the Czech Republic. The Wall Street Journal linked it with a possible takeover of Danish fixed-line leader TDC last month.

NCB Stockbrokers analyst Tricia McEvoy said eircom shares had been trading at a 7% discount to the market before yesterday's developments. This would suggest a valuation of around €2.3 million would put it in line with its peer group around €700 million lower then the price speculated yesterday.