Fund expects 'smooth' Eircom bid

Australian investment group Babcock & Brown Capital expects its €2.36 billion takeover bid for Eircom to be "a smooth transaction", it said yesterday.

The investment fund, which currently holds 28.8 per cent of Eircom, confirmed in a formal announcement to the Australian Stock Exchange that it has lodged a joint proposal in conjunction with the Eircom Employee Share Ownership Trust (Esot) to Eircom's board.

About 12,000 of Eircom's current and former employees are members of the Esot and hold a 21.4 per cent stake in the telecoms company, meaning the joint bidders hold a combined stake of more than 50 per cent. Eircom made its announcement about the proposal on Good Friday.

Rob Topfer, executive director of Babcock & Brown Capital, said it was looking forward to the board's response to its joint bid and said it was pleased that the Esot had joined the investment fund in its approach.

"We have the support of a first class consortium of banks and anticipate a smooth transaction."

Four international banks - Barclays, JP Morgan, Credit Suisse and Dresdner Kleinwort Wasserstein - are thought to be financing the deal, subject to due diligence, with JP Morgan acting as Babcock & Brown's adviser in its talks with Eircom.

Babcock & Brown indicated yesterday that it would not be discussing the joint proposal further until it has received a response from Eircom.

"We look forward to the opportunity to address all stakeholders on the merits of our proposal, once we have received a definitive response from the board," Mr Topfer said.

Representatives of the Australian investment fund did attempt to make contact with the Communications Workers Union (CWU) over the Easter weekend following the CWU's statement that it was "totally appalled" by Babcock & Brown's failure to meet with any of the unions representing Eircom workers.

However, discussions between the unions and the Australian company have yet to take place.

The CWU, which represents 6,000 of Eircom's 8,000 employees, said on Friday that it would treat any takeover as hostile unless Babcock & Brown got in touch. "It is not unreasonable to expect that any potential buyer would treat the trade union group as a key stakeholder and thus engage with us," CWU general secretary Steve Fitzpatrick said.

The Esot, which includes around 3,000 CWU members, must ballot the trust's beneficiaries on any deal.

Under the joint proposal, the bidders would pay €2.20 per share for Eircom, along with a dividend of 5.2 per cent already expected by shareholders. Esot members would be granted guaranteed preference shares in the company after the takeover in exchange for their €507 million worth of ordinary shares .

If Babcock & Brown and the Esot are successful in their bid, they will be Eircom's fifth owners in six and a half years.