E-Island withdraws Eircom bid

George Soros is Tony O'Reilly's partner in the Valentia bid

The e-Island consortium run by businessman Denis O'Brien has withdrawn its bid for Irish telecoms group Eircom just as two rivals have entered the fray.

The Eircom board confirmed it had recieved preliminary approaches from US buyout specialists Kohlberg Kravis Roberts and New York-based Blackstone Communications Management Associates, a private equity fund.

E-Island had been locked in a bidding war for the company with Irish media magnate Tony O'Reilly and George Soros's Valentia consortium, whose bid still stands.

The Eircom board, which has made clear it will secure the best price for shareholders, met on Tuesday night to consider the rival bids but failed to make a recommendation.

The deadline for e-Island's offer expired at midnight after the board meeting.

But the battle might not be over yet.

Speaking on Irish television station RTE, Mr O'Brien said that if the Eircom board wanted to open a dialogue with his consortium, it was "entirely up to them".

Employee deal

Earlier on Tuesday, Valentia struck a deal with the employees of telecoms group Eircom that could have blocked all other takeover offers.

Any bidder for Eircom needs the backing of 80% of shareholders for a takeover to succeed.

Eircom's employee share ownership trust (ESOT) controls 14.9% of the company, which means Valentia only needed to find another 5.1% to be able to block any deal.

Valentia's agreement with ESOT would allow the employees to increase their stake in the company to 29.9% if their takeover bid succeeds.

Higher bids

The Eircom board had been expected to tell the Valentia that it would have to raise its 1.221 euro ($1.03) per share offer if was to recommend it to shareholders, the Irish media reported on Wednesday.

Valentia's bid was two cents less than the 1.24 euro per share plus 5% in stock options offered by e-Island which valued the company at about 2.75bn euros.

E-Island had earlier offered the employees trust a 25.1% stake in Eircom in exchange for its support.

For sale

Eircom was privatised in 1999, but it disappointed hundreds of thousands of small investors when its share price slumped.

Dutch telecoms company KPN and Sweden's Telia, which together own 35% of Eircom, are expected to accept whichever offer the Eircom board recommends.

Earlier this year Eircom sold its mobile phone unit Eircell to Vodafone.

Eircom is on 8 June due to announce results for the year ended 31 March 2001.