[IT]Babcock, Eircom close to deal on due diligence

viking

http://www.ireland.com/newspaper/finance/2006/0321/37844646BZEIRCOM.html

Babcock, Eircom close to deal on due diligence
Arthur Beesley, Senior Business Correspondent

Eircom and Babcock & Brown are moving towards final discussions on the terms for a due diligence examination of the Irish company's books by the Australian suitor.

The Eircom board will meet before the end of this week to discuss the terms of access for Babcock & Brown, which has accumulated almost 29 per cent of the telco since its initial investment last autumn.

The international investment bank Credit Suisse declared shortly after the close of business yesterday that it had acquired 3.1 per cent of Eircom just before the St Patrick's Day holiday on Friday. The bulk of its 33.24 million shares are held by Credit Suisse Securities (Europe) Ltd and the remainder are held by Credit Suisse International.

The bank's intentions for this investment were not clear last night.

The discussions on due diligence with Babcock & Brown come almost a month after Eircom declared that it had received a preliminary approach from the Australians, who rapidly increased their stake to 28.8 per cent from 12.5 per cent. Assuming agreement on access to Eircom's books is reached, due diligence could begin as early as next week.

Two issues remain outstanding for the Eircom board, which is chaired by Sir Anthony O'Reilly. These centre on the price Babcock & Brown would pay to take control of the company and the extent to which the Australians have the financial capacity to execute a transaction.

It is understood the Australians believe they have satisfied Eircom on the financing of a deal. Still unclear, however, is the question of the price they would pay. Babcock & Brown paid no more than €2.20 per Eircom share as it built up its stake at a cost of more than €500 million. Thus they are unlikely to pay much more than that, if anything more, to conclude a deal.

The valuation question is highly sensitive for Eircom, given that the company was poised to realise a little above €2.40 per share in inconclusive takeover talks late last year with Swisscom. Justifying a price at a significant discount to that proposed by Swisscom may prove difficult for Eircom. If, as is likely, the company decides to push ahead with a sale process at around the €2.20 level, it may point to the absence of any other bidder.

Babcock & Brown is believed to have stopped buying Eircom shares now that its stake is just below the 29.9 per cent level that would trigger a mandatory bid. Eircom shares closed three cent stronger last night at €2.17, after the price dropped when the Australians withdrew from the market.

It is believed there has been no formal dialogue between Babcock & Brown and the staff-controlled trust, which owns 21.5 per cent of Eircom.

© The Irish Times

bealtine

viking wrote:

The international investment bank Credit Suisse declared shortly after the close of business yesterday that it had acquired 3.1 per cent of Eircom just before the St Patrick's Day holiday on Friday. The bulk of its 33.24 million shares are held by Credit Suisse Securities (Europe) Ltd and the remainder are held by Credit Suisse International.

The bank's intentions for this investment were not clear last night.

I wonder who Credit Suisse could possibly be acting for?

jmcc

bealtine wrote:

I wonder who Credit Suisse could possibly be acting for?

I wonder if Denis O'Brien even wants to get involved. Imagine O'Brien replacing O'Reilly as chairman.

Regards...jmcc

damien

O'Brien now owns a percentage of O'Reilly Newspapers. He seems to be the man to bring in to boost share prices so eircom can get more bang out of their share buck when someone wants to buy them. Handy that.

Altreab

damien.m wrote:

O'Brien now owns a percentage of O'Reilly Newspapers. He seems to be the man to bring in to boost share prices so eircom can get more bang out of their share buck when someone wants to buy them. Handy that.

I think its more likely O'Brien wants to be a thorn in O'Reilly's side more than boost share prices for him (they really dont like each other from a personal and business viewpoint) .....although if O'Brien makes a profit on the shares its all the sweeter for him

viking

From today's IT, nothing terribly new...

Eircom board meets to discuss terms of due diligence
Arthur Beesley, Senior Business Correspondent

The board of Eircom meets today to discuss terms for a due diligence examination of its books by Babcock & Brown, the Australian investment fund that has built up a stake of almost 29 per cent in the former State telecoms group.

A draft agreement for a due diligence process is under discussion between advisers for both sides, but the question of the price that the Australians might pay remains unresolved.

Babcock & Brown paid no more than €2.20 per Eircom share to build its 28.8 per cent stake and it is not known whether it will pay any premium above that to secure full control.

This presents difficulties for Eircom's directors, who were poised to sell the group for more than €2.40 per share before takeover talks with Swisscom broke down late last year.

The Australians have not yet indicated that they would pay any premium and the debate within Eircom is said to focus on securing an increase above the indicative price level of €2.20 per share.

Such an increase, if forthcoming, is unlikely to be significantly in excess of €2.20.

Eircom shares gained one cent on the Dublin market yesterday, closing at €2.18.

In advance of due diligence, there has been no formal dialogue between Babcock & Brown and the worker-controlled trust in Eircom that owns 21.5 per cent of the group.

When their stakes are taken together, Babcock & Brown and the Employee Share Ownership Trust have some 50.3 per cent of Eircom between them.

Thus they would be seen to be acting in concert if they were to hold formal talks at this relatively early stage of the process.

© The Irish Times

BendiBus

Following from the above article, could B&B even talk to the unions without effectively talking to the ESOT?

http://www.rte.ie/business/2006/0322/eircom.html

paulm17781

Do B&B need union approval or can they buy the company and not give anything to the ESOT?

eirlink

bealtine wrote:

I wonder who Credit Suisse could possibly be acting for?

"smart" move

Tom Young

eirlink wrote:

"smart" move

Hopefully not.

The reality is that there was little value in the results as released for quarter 4 2005, and a 'top up' from the new mobile business got eircom through the quarter.

The structural separation that would need to take place for B&B to manoevre is do deep and expensive that its questionable whether or not the finance and equity houses will rate eircom above the hold position, until the deals are done. Then a risk to sell rate.

I don't see Meteor being long for this earth is B&B succeed.

ESOT stand to gain in the medium term on the transactions, their reservations are mere puff.

Its a crying shame that there is no strategy evident for the company. The markets and consumers need to see this rather than expensive marketing campaigns which detract from the value to the shareholder.

I personally hold a Seanad member as accountable for this, and she failed to be elected to office last time around.

Tom.

BendiBus

Babcock & Brown have made a joint bid with the ESOT

http://www.rte.ie/news/2006/0414/eircom.html

eircomtribunal

It's a joint buy-out approach by Babcock & Brown and ESOT (the vehicle by which the CWU masterminded a tax free one billion loot operation on the company).
And the CWU has the brass neck to then be publicly disgusted:

Meanwhile, the Communications Workers' Union has said despite assurances to the contrary it has not been invited to discussions with Babcock & Brown and says it is appalled by what it describes as Babcock & Brown's disingenuous behaviour.

Now, that is disgusting.

P.

eircomtribunal

From Bloomberg.com

Babcock & Brown Offers $2.86 Billion for Eircom Group (Update1)
April 14 (Bloomberg) -- Eircom Group Plc, Ireland's biggest telephone company, said it received a 2.36 billion-euro ($2.86 billion) takeover proposal from Babcock & Brown Capital Ltd., an Australian investment bank, and the company's own employee share ownership trust.

Sydney-based Babcock & Brown offered 2.20 euros for each share in Dublin-based Eircom, the Irish company said in an e- mailed statement today. That's 2.8 percent more than yesterday's closing price.

The proposal ``may or may not lead to an offer being made for Eircom,'' the statement said.

The bid for Eircom comes four months after a failed takeover attempt by Swisscom AG, Switzerland's largest phone company. Eircom controls 79 percent of Ireland's fixed-line phone market and offers an opportunity to access the country's mobile-phone market, where consumers spend about 50 percent more on calls than in the U.K., Germany and Italy.

Eircom shares have gained 38 percent since the company returned to the stock market in March 2004 after a three-year absence. The company has a market value of 2.30 billion euros.

Babcock & Brown has built up a 28.8 percent stake in Eircom since October, to become the company's biggest shareholder. Eircom employees own 21.6 percent of the stock through Eircom ESOP Trustee Ltd.

European Takeovers

Europe's phone market has seen a wave of takeovers in the past year, including Telefonica SA's 17.7 billion-pound ($31 billion) purchase of the U.K.'s O2 Plc and the leveraged buyout of Denmark's TDC A/S.

Swisscom ended talks to buy the Irish company in December after the Swiss government, which owns 66 percent of Swisscom, banned the company from making foreign acquisitions.

Babcock & Brown said Feb. 22 it was in talks with Eircom about a possible bid. It said March 2 that Eircom may be split into two units after a takeover.

Eircom's net income in the three months through December declined 44 percent to 19 million euros from a year earlier after stiffer competition drove down profitability, the company said in February.

The Irish company, which sold its mobile-phone business to Vodafone Group Plc in 2001, last year returned to the wireless market by agreeing to buy Ireland's Meteor in an effort to make up for a drop in revenue from traditional phone services.

"We look to mobile to bring growth back to the company,'' Eircom Chief Executive Philip Nolan said in November.

P.