E-Island And Valentia Both Still In The Eircom Race

by Jason Gorringe, Tax-News.com, London

27 July 2001

Mr Denis O'Brien, the chairman of eIsland, said yesterday at a press conference that after eight months of work trying to acquire Ireland's fixed-line telecoms operator Eircom he would not rule out an increase in his consortium's bid of Euros 1.36 a share if rival Valentia increases its offer. "We would have to consider anything," he said.

Valentia was given two weeks from July 23rd by the Eircom board to come up with a further offer when it accepted the E-Island bid, with the board clearly hoping that Valentia would find the extra money, largely because it thought it couldn't rely on the support of the key 15% ESOT (Employee Share Ownership Trust) shareholding for an E-Island bid.

The ESOT has consistently said that it considers the E-Island consortium to be too highly geared, and in a further ballot whose result was announced just last night the ESOT's members confirmed that they still supported Sir Anthony O'Reilly's Valentia bid even at a lower price.

Apart from the ESOT, the other major shareholder in Eircom is Comsource (a vehicle controlled by Sweden's Telia and KPN of the Netherlands) with 35% of the shares. Comsource had committed to Valentia, but was released from its commitment when E-Island bid over Euros 1.35 per share. Comsource has every reason to accept the higher offer - unlike the ESOT, it has nothing to gain from the better-backed Valentia consortium.

Mr O'Brien used yesterday's press conference to give details of the corporate governance structure that eIsland will put in place if successful.

It will offer the ESOT three seats on the board while Mr O'Brien and his associates will have five. Spectrum Equity Investors, the US venture capital fund led by Mr William Collatos which is backing eIsland will have an additional five seats. It was also confirmed that Mr O'Brien will be the chairman and chief executive officer of the company.

"The ESOT will have meaningful participation in decision making," said Mr O'Brien. He added he was confident the trustees of the ESOT could be persuaded to switch their support to eIsland - but that was before the ballot result was announced.

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