Eircom's employee share ownership trust (Esot) will increase its stake in the former State telecoms company to some 35 per cent after the €2.36 billion bid, which is likely to be formalised today with Babcock & Brown Capital, the Australian investment fund.
The takeover was approved by Eircom's board yesterday afternoon and the terms of the agreed bid were said last night to be "99.9 per cent certain". A notification to the stock market is expected today. The transaction documents will confirm the nomination of former BT executive Pierre Danon as incoming executive chairman to replace Sir Anthony O'Reilly, but the position of the telco's current management team is still unclear.
The documents are also likely to cast light on the indebtedness that will remain with the company after the deal, which is likely to be financed by Barclays, Credit Suisse, Dresdner Kleinwort Wasserstein and JP Morgan. Mr Danon is a senior adviser to JP Morgan.
While Babcock & Brown has promised to be a long-term investor in Eircom's network, the company's indebtedness will have a bearing on the level of resources available for investment.
Babcock & Brown and the Esot will pay €2.20 per share, in addition to the second interim dividend of 5.2 cent per share that the company has promised to pay on June 26th. The transaction itself will not close for several weeks.
However, it emerged last night that it would increase by more than 60 per cent the Esot's current stake of 21.5 per cent, leaving the trust in control of more than one-third of the telco.
On the basis that Babcock & Brown and the Esot have agreed a joint plan for the company, this means the deal will be less expensive for the Australians. For their part, Esot members will be told before voting on the proposal that the transaction will be self-financing for the trust.
At some 35 per cent, the trust's shareholding will be greater than the 30 per cent it held after Sir Anthony's Valentia's consortium took the company private in 2002. Its position is further strengthened by the fact that Eircom now owns Meteor. When Valentia bought Eircom, the company had already sold its former mobile arm Eircell to Vodafone.
In preparation for the bid, the company brought forward its annual results last week. With due diligence completed in advance of yesterday's meeting and an agreement on shareholding finalised in recent days, the way is now clear for Eircom's fourth change of ownership since its first flotation in 1999.
Babcock & Brown and the Esot already hold some 50.3 per cent of Eircom, curtailing to a significant extent the ability of any other shareholder to block a deal.
The prospectus for the takeover is likely to guarantee the terms and employment conditions of staff. In anticipation of a transaction, Mr Danon met worker representatives last week. After once-off property gains, Eircom reported a rise in pretax profits to €112 million in the year to March from €88 million.
