Babcock to give contract account

EIRCOM OWNER Babcock Brown Capital (BCM) is preparing to make a statement next week on the termination of the agreement under which troubled Australian investment bank Babcock Brown manages the Irish telco.

Any statement will be closely scrutinised by BCM shareholders, one of whom made an indicative takeover approach for the business late last month. BCM rubbished the non-binding proposal from Isle of Man fund LIT but the takeover approach is widely perceived as a measure of investor dissatisfaction with BCM’s performance, whose shares have lost almost 66 per cent in the last 12 months.

BCM, a Sydney-listed investment fund set up by Babcock two years ago, has been in talks about the termination of the bank’s management agreement for some time. The talks follow the collapse of Babcock’s share price – down more than 96 per cent in the past year – amid rising doubt about a business strategy under which it acquired “infrastructure” assets and hived them off to satellite investment funds.

Although both organisations had set yesterday as the deadline for the conclusion of the negotiation, no statement was issued.

It is believed, however, that the BCM board met yesterday and that a notification to shareholders will be issued in the coming days.

There is considerable doubt in market circles that LIT would be able to muster the financial strength to execute a takeover of BCM, whose prime asset Eircom is saddled with debts of more than €4 billion.

LIT, which owns 6.7 per cent of BCM alongside its parent Laxey Partners, has a capitalisation of £105.5 million on the Alternative Investment Market in London. BCM’s market capitalisation is Aus$285.68 million.

Sources with knowledge of Eircom’s affairs believe that the unwinding of its relationship with Babcock will ultimately lead to a change in the ownership of the firm.