The tabling of a €2.4 billion bid for Eircom by Babcock & Brown together with the Employee Share Ownership Trust, sets in train the process that will see the former national phone company depart the stock market sometime in the autumn.
Given that the offer is at a 35 per cent premium to the price of Eircom shares before the current bout of takeover speculation began, it must be assumed that it will succeed. From the perspective of the institutional shareholders it is too good a chance to pass up.
The outcome is unlikely to be so palatable for the company's customers and other stakeholders. Under the terms of the deal Eircom's debts will balloon to €3.8 billion. Understandably, Babcock & Brown was somewhat vague about how this debt will be serviced, but it seems reasonable to assume it will involve less investment and higher prices.
And that is pretty much where it all begins and ends goes the free-market school of thought. Never mind the national interest, broadband penetration and all that, the die was cast for Eircom in 1999 when the Government sold the company in its initial public offering.
Everything that has happened since has been the result of the relentless logic of the market whereby investors see opportunities and take their gains. Eircom came to the market with a market valuation of €6 billion and almost no debts. Under the deal proposed by Babcock & Brown the company's worth will fall to €1 billion. The difference has gone into the pockets of venture capital funds and institutional investors, including those exiting this time around. The losers are small shareholders, customers and the wider economy.
The ink is not even dry on the present deal and already the prospective new owner is making plans for its pay day, with talk of a future "liquidity event", such as yet another flotation. It is a ruthless process, but before casting judgment it must be remembered that it is the mechanism by which the bulk of private pensions are funded and savings are channelled into productive investment.
It is of course open to the State to step in and stop this cycle and there is a case to be made that in this particular situation the market has not delivered the desired outcome; a telecoms infrastructure suited to the economy's needs. Such a course of action is not on the Government agenda, and would represent a policy shift of seismic proportions and dubious merit.
Instead, the State has attempted to address the problem by funding an alternative broadband network and leaving it to the regulator to ensure there is competition in the market. To date it has had little success, certainly if the level of broadband penetration throughout the Republic is taken as the key indicator. There is a need for a rethink with this approach in order to ensure customers and the wider economy do not pick up the tab for Eircom's latest turn on the corporate merry-go-round.