Swisscom to value Eircom shares over €2.40 for sole access

Eircom is to give Swisscom exclusive access to its books after securing an agreement that any offer for the Irish group will value it at more than €2.40 per share.

Following talks between the two sides on Monday, the Swiss telecoms group has been granted sole rights to sift through Eircom's financial information, as it considers whether or not to proceed with a bid for the company.

In return, it has agreed to an indicative offer price for Eircom that is marginally above the €2.40 per share price level. This would value Eircom at nearly €2.6 billion. Sources close to the company said that the indicative offer price was less than €2.45 a share, however.

Swisscom's scrutiny of Eircom's financial information is expected to be relatively quick. Sources suggested it should last around two weeks, given that extensive due diligence was carried out on the company, both when it was sold to private equity companies three years ago and again when it returned to the stock market last year.

Despite market talk of a bid as high as €2.70, shares in Eircom closed five cent, or 2 per cent, lower at €2.32 last night as investors wait for firm evidence of the Swiss group's intention to bid.

Attention now will turn to Swisscom, which posts third-quarter results tomorrow.

The cash-rich Swiss group, which has repeatedly said that it wants to expand outside Switzerland's borders, is expected to report higher net profit but lower revenues.

But the real interest will lie in what it has to say about Eircom as it has made no comment to date on any deal. The company has also been linked to the $11 billion-plus (€9.33 billion) battle for TDC, Denmark's top telecoms operator.

Pressure has been building on Swisscom to find sources of income outside its home market, where it faces tough competition from upstarts such as Cablecom and the TDC-controlled Sunrise.

Its failure to buy Telecom Austria and Cesky Telecom in the Czech Republic earlier this year has added to the pressure.

Any bid for Eircom would need to win the support of the company's biggest shareholder, the Employee Share Ownership Trust (ESOT) which holds just under 22 per cent of the company. It is understood that the trust's board had not yet discussed its position.

Other large shareholders on the Eircom share register include Australian investment firm, Babcock & Brown, which recently acquired a 12.5 per cent stake in the company and US fund management group, Capital Research, which holds a 4.6 per cent stake.

(Additional reporting by Reuters)