Valentia takeover of Eircom clears the final hurdle

 

The Tβnaiste has approved the takeover of Eircom by Valentia Telecommunications, clearing the last obstacle to the passing of the former Telecom ╔ireann into private ownership. Ms Harney, who is also Minister for Enterprise and Employment, decided not to refer the bid to the Competition Authority after obtaining "behavioural undertakings" from Sir Anthony O'Reilly, Valentia non-executive chairman.

Sir Anthony, executive chairman of Independent News & Media, has agreed to "stand aside" from any decision made by Eircom regarding Chorus, the cable company 50 per cent owned by Independent News & Media. He has also undertaken not to receive any "papers in relation to issues in which Eircom may compete with Chorus".

The issue of Sir Anthony's potential conflict of interest was raised with the Department by the Director of Telecommunications Regulation, Ms Etain Doyle.

Chorus is the State's second-largest cable network operator and has a monopoly in Cork, Limerick and the outskirts of Dublin. The company offers limited telecoms services at present but has the potential to be a serious competitor to Eircom.

The details of the undertaking given by Sir Anthony will not be made public, according to the Department of Enterprise and Employment. The Department will have no supervisory powers to police the agreement but will be able to take court action if it can prove they have been breached. It is the first time such undertakings have been given to secure merger approval.

The former Heinz chairman has under 5 per cent of Valentia and a controlling 27.2 per cent stake in Independent News & Media. Department sources said yesterday that, on foot of yesterday's clearance, the businessman could increase his stake in Valentia to 25 per cent without needing further approval from the Department. They added that individuals connected to Sir Anthony could independently acquire up to 25 per cent each, without triggering a referral under the mergers and monopoly legislation.

Currently, the balance of Valentia shares are held by two private equity houses, Providence Equity Partners and Soros Fund Management, and the Eircom Employee Share Ownership Trust. The Office of the Director of Telecommunications Regulation has also approved the change in ownership of Eircom's telecommunications licence, which was a separate regulatory hurdle.

Valentia will declare its €3 billion (£2.36 billion) offer "unconditional" by close of business today, and the process of formally taking control of the company will then begin. A spokesman for the consortium, which has acceptances from shareholders controlling 88 per cent of the company, said the handover would be complete in a matter of weeks.