Babcock makes light of LIT approach

BABCOCK BROWN Capital (BCM), the Australian investment fund that controls Eircom, has rubbished a takeover approach for its business from Isle of Man investment firm LIT, claiming the proposal did not merit serious consideration by its board. While BCM shares rose 25 per cent from historic lows on foot of the LIT's intervention, the fund made light of the takeover approach and said the firm did not provide an indicative value for its proposal.

A spokesman for LIT, which owns 6.7 per cent of BCM with associate firm Laxey Partners, declined to comment yesterday.

The company is considering whether to call for an extraordinary general meeting of BCM shareholders to approve the appointment of three new independent directors in light of the fund's "lack of responsiveness" to its approach.

Certain informed sources see its approach as an attempt to pressurise BCM into an early return of capital to shareholders following its decision to halt making new investments. However, they say the 59 per cent collapse in the fund's share price means a change of ownership is all but inevitable.

The consideration proposed by LIT was in the form of LIT shares, which closed 9.38 per cent stronger at £8.75 last night on the Alternative Investment Market in London. Such a price implies a market capitalisation of some £107.3 million. BCM's rejection of the LIT approach came as Eircom's board appointed former Glanbia chief Ned Sullivan as non-executive chairman, in succession to former executive chairman Pierre Danon. Mr Sullivan is non-executive chairman of food group Greencore and construction firm McInerney Holdings.

The approach - which if successful would lead to Eircom's fifth change of ownership under a decade - is said to have met a "sanguine" response from Eircom.

BCM said that LIT wrote on Monday to its chairman wishing to explore an offer for its outstanding equity share capital. "The consideration proposed by LIT was in the form of shares in LIT plc, an AIM-listed entity with a market cap of £99 million," BCM said.

"LIT was also proposing that BCM make a cash dividend payment (amount unspecified) from BCM's existing cash. However, LIT did not provide an indicative value in relation to their proposal. LIT indicated that the value of [its] proposal would be determined following a due diligence review."

BCM said it understood that LIT had announced its intention to "revisit" its course of action and that it was considering requisitioning an egm. "Until LIT has clarified its intentions . . . the directors do not consider it necessary or possible to assess the proposal or make any recommendations to shareholder," BCM said. The fund's shares closed 40 Australian cents stronger at Aus$2 (€1) yesterday after reaching a new low of Aus$1.41 on Wednesday.