A NUMBER of companies are planning to drop out of the race to acquire Eircom after the employee share ownership trust (Esot) decided on Friday to back the bid of Singapore Technologies Telemedia (STT).
Irish telecoms executive Seán Melly is believed to be preparing to withdraw his interest in Eircom following the decision by the Esot, which has left STT as the clear favourite to acquire the Irish telecom company.
Melly is understood to have been pursuing a bid for Eircom with the backing of some members of the Rothschild family, which has been involved in banking in Europe for more than 200 years. The Rothschilds were to have participated in providing equity for the bid.
JP Morgan was also involved in Melly’s proposed offer for Eircom.
Private equity group Arcapita is also believed to have signalled that it is withdrawing from the race to buy Eircom, with sources indicating that the interest expressed by Luxembourg-based investment group CVC has cooled.
The race to acquire Eircom took a seemingly decisive turn on Friday when, as revealed by The Irish Times, the Esot informed its members that it had agreed to support STT’s bid on “an exclusive basis for a period of time”.
The Esot owns 35 per cent of Eircom and carries significant influence in how its future will be shaped.
The employee share trust, which comprises about 14,000 current and former Eircom employees, could roll over its stake in Eircom as part of STT’s takeover of the business.
The Esot is believed to favour an industry player as Eircom’s new owners, after several years of control by private equity investors.
The Esot had been in contact with a number of the potential bidders for Eircom. These groups became aware of the Esot’s intentions to link up with STT early last week.
STT is expected to lodge its bid for Eircom this week, possibly on Tuesday. Reports have suggested that the Singapore group will bid in excess of €100 million for Eircom.
The sale process is being handled by UBS on behalf of Eircom Holdings, the Sydney-listed parent group of the Irish telco.
Eircom Holdings has indicated that it would like to tie down a deal by the end of this month.
Others to express an interest in purchasing Eircom include private-equity group Permira, which is believed to be working with JP Morgan on a potential offer.
TaemasBridge, an investment vehicle led by Australian financier and former Babcock Brown executive Rob Topfer, tabled a A$175 million offer for Eircom in April, which was made public its Sydney-listed parent group.
Mr Topfer’s bid, which also involved recently-departed Eircom chief executive Rex Comb, has been opposed by Eircom’s management in Ireland and the company’s trade unions.
Mr Topfer was the architect of Babcock Brown’s takeover of Eircom in 2006, which has left the Irish telco with a debt of about €3.8 billion. Restructuring this debt pile will be the key to any successful takeover of Eircom.
Founded in 1994, STT specialises in mobile communications. It is a 75 per cent investor in Asia Mobile Holdings, which has interests in Singapore, Laos and Cambodia. It also owns Global Crossing, the fibre-optic cable firm with operations in Ireland.
Eircom owns Meteor, the number three mobile player in Ireland and holds a 3G mobile licence. It is also the biggest broadband provider here, providing convergence opportunities with its core fixed-line business.
Separately, former Vodafone executive Paul Donovan is due to take over at Eircom on July 1st. It is not clear if any change of ownership agreed by that date would affect his appointment.
