Stakes rise in Eircom auction

George Soros: member of team attempting to beat e-Island to Eircom's hand

Entrepreneur Denis O'Brien has raised the stakes in the fight to snatch Eircom, Ireland's leading telecoms operator, from the grasp of media magnate Sir Anthony O'Reilly and billionaire financier George Soros.

The e-Island consortium, led by Mr O'Brien who was rated by the Sunday Times as Ireland's highest earner last year, has raised the value of its bid cocktail to the equivalent of 1.29 euro per Eircom share.

The offer, made of a mixture of cash and future rights over e-Island shares, compares with the consortium's previous offer of 1.24 euro per share.

And it trumps a 1.22 euro-per-share deal proposed by Valentia, the bidding vehicle backed by George Soros, the currency speculator who earned the title of 'the man who broke the Bank of England', and former Heinz chief Sir Anthony O'Reilly.

Eircom shares closed in Dublin on Thursday at 1.18 euro.

'Best available'

E-Island said on Friday that its revised offer, worth 2.9bn euros (£1.78bn) in all, was the "best available to all shareholders, in terms of both cash and the opportunity to participate in [Eircom]'s] future".

Eircom's board should, in line with its duty to promote shareholders' interests, recommend the offer "forthwith", the statement said.

Mr O'Brien told journalists: "We have been told all along that the highest offer wins, and we are very, very pleased at the position we are in, and confident the decision will go in favour."

Eircom, in a statement made after receiving e-Island's new terms, said it was seeking clarification on "a number of issues" surrounding both bids, which directors discussed at a meeting on Thursday.

The statement made no mention of other preliminary takeover approaches made by US buyout specialists Kohlberg Kravis Roberts, and New York-based Blackstone Communications Management Associates, a private equity fund.

Key shareholder

E-Island's fresh bid is the latest salvo in a long-running battle to buy Eircom, the former state telecoms firm, which was privatised two years ago.

The bidding war has offered some hope to the thousands of Eircom shareholders, many small-time investors, of the firm's stock regaining some of the ground lost as sentiment over telecoms firms has soured around the world.

The takeover battle is complicated by the need to woo not just Eircom's directors but the firm's employee share ownership trust (Esot), which owns 14.9% of the company.

As takeover laws require a successful bidder to win the backing of holders of 80% of Eircom shares, support from Esot plus another 5.1% stake would be sufficient to block a deal.

Valentia is believed to have offered Esot three seats on the board of a holding company which would be set up to run Eircom, should its bid succeed.

Esot currently has only one representative on the board, former Irish prime minister Dick Spring.

Continental telecoms groups KPN and Telia, which between them hold a 35% stake in Eircom, are reported to be waiting for direction from the company's directors.

Rich list

Mr O'Brien topped Ireland's high earning table last year after making an estimated £175m from the sale of Esat, the telecoms firm he co-founded in 1991, to British Telecom.

Mr O'Reilly, who also controls the firm which runs UK newspaper The Independent, was ranked seventh in the earnings league.

Mr Soros earned his title as the BoE-buster after making an estimated £1bn by betting on the devaluation of sterling ahead of the currency's 1992 exit from the European exchange rate mechanism.

Dermot Desmond, Ireland's second highest earner last year, is also rumoured to have expressed an interest in Eircom.