Eircom chiefs switch affections again

Eircom: returning its backing to Tony O'Reilly

Chiefs at Ireland's biggest telecom firm, the target of a bitter takeover war, have again switched allegiances, handing advantage to a bidding team head by media magnate Tony O'Reilly.

Directors at Eircom have agreed terms on a 3bn offer from Mr O'Reilly's Valentia consortium, which is also backed by Bank-of-England breaker George Soros.

The move represents the second change in affections by Eircom directors during a 10-month bidding war between Valentia and eIsland, a consortium led by telecoms entrepreneur Denis O'Brien.

After originally supporting Valentia, Eircom directors last month accepted overtures from eIsland.

Eircom chairman Ray MacSharray said on Friday that a decision by major shareholders to plump for the Valentia bid had been crucial in again swaying independent directors at the telecom giant.

Mr O'Reilly, a former president at goods giant Heinz, said he was "delighted" by the news.

Sticking point

But Valentia's offer, equivalent to 1.365 euros in cash per Eircom share, must yet pass a members' ballot at an employee trust (Esot) which owns 15% of shares in the telecoms giant.

EIsland chiefs have offered Esot an enhanced role in the running of Eircom.

EIsland on Friday afternoon, as Valentia was still attempting to win favour, again urged trustees to consider the offer.

And the consortium refused to concede defeat even after the Valentia announcement late on Friday.

"There is an awful lot in the Valentia offer that needs to be clarified," a spokesman said.

'Killer blow'

But analysts reckoned that the support for Valentia by key shareholders, including a holding company backed by telecoms firms Telia and KPN, spelled the end for Mr O'Brien's ambitions.

"It is the killer blow," said Kevin McDonnell, analyst at Dublin-based Bloxham Stockbrokers.

"It is a very good deal. I would be very surprised if eIsland remains in the process."

Sliding shares

Eircom, the former Irish state telecoms firm, claims an 80% share of the country's fixed line market.

But while the company has, unlike foreign rivals, little debt, its shares have suffered as investor confidence in telecoms firms has waned.

Valentia's 1.365 euros-a-share offer compares with a stock price of 3.90 euros when Eircom was floated in 1998.

Eircom shareholders also saw some gain from the sale of the firm's mobile phone unit, Eircell, to Vodafone earlier this year.