Eircom suitor edges closer to bid

Babcock & Brown could edge closer to making a bid for Eircom today, with the board of the telecoms company expected to discuss the matter at a meeting.

Babcock is also thought to have made progress in convincing Eircom's staff of the merit in a takeover. Attending today's meeting will be Eircom chief executive Philip Nolan. Eircom executives have declined to comment on the Babcock & Brown approach over the last few weeks.

The Employee Share Ownership Trust (Esot), which controls 21.5 per cent of Eircom, is believed to be well disposed towards an offer from the Australian fund and may be prepared to publicly support an indicative approach.

Unions representing the staff had previously criticised Babcock for failing to meet them to talk about a takeover.

When taken together, the Esot and Babcock would have 50.3 per cent of Eircom and would thus have been deemed to have been acting in concert if they held formal discussions on an offer.

One source suggested the two parties had reached "a meeting of minds", even though the price Babcock might offer for Eircom has not yet been set.

The Esot is also likely to seek a mechanism under any takeover that would allow its members to minimise their tax liability.

Details of such a scheme are not thought to have been settled yet, but they are not seen as an obstacle to a bid at the right price.

Babcock has paid no more than €2.20 per share to build its 28.8 per cent holding in the company and may be unwilling to raise this significantly.

This could create problems for Eircom's directors, who were ready late last year to agree a takeover at more than €2.40 with Swisscom.

Those negotiations broke down after the Swiss government said it would veto any such deal. Babcock is the only suitor showing interest in Eircom at the moment.

It was reported at the weekend that the fund was preparing to pay €2.25 per share, but the market did not get overly excited by this yesterday.

Shares in the Eircom moved up by three cent, closing at €2.15 in Dublin.

Today's Eircom board meeting has been scheduled for some time and will not be dedicated solely to the Babcock proposal if it is discussed. The next stage of the process, if approved by the board, would be to invite Babcock in to complete due diligence at the company.

The Australian fund has wanted this to happen for some time and could be expected to move quickly if given the go ahead.

It has already addressed some concerns held by Eircom's board by amending its first proposal on how the process would work.

Babcock has full finance in place for a takeover.