Eircom has cleared the decks for a full bid from Australian investment fund Babcock & Brown and its employee share ownership trust (Esot) after it brought forward publication of its annual results to Monday, 10 days earlier than expected. The bid, expected later next week, will value the former State telco at €2.36 billion.
With a due diligence examination of Eircom's books nearing its final stages, the investment bank Credit Suisse said last night that two of its units had increased their stake in the telco to 8.07 per cent from 3.1 per cent.
The units in question, Credit Suisse Securities (Europe) Ltd and Credit Suisse International, are believed to hold shares for hedge funds that are trading in Eircom stock before a full bid.
Eircom shares closed one cent weaker yesterday at €2.13, seven cent lower than the €2.20 valuation proposed by the Australian investment fund and the Esot.
The Esot, which already owns 21.5 per cent of Eircom, is increasingly likely to raise its stake to 30 per cent after a takeover.
The trust's stake was to hold steady at 21.5 per cent under the original proposal with the Australians.
Informed sources said there had been movement in recent days to modify the proposal.
A 30 per cent shareholding would equal the Esot's stake after Sir Anthony O'Reilly's Valentia consortium took the company private in 2002. Then, the Esot was able to double its shareholding to 30 per cent as its price for supporting the Valentia proposal over a rival approach led by Denis O'Brien, the Esat founder.
It is unlikely that news of the expected bid will emerge with results for the year to March. However, the move to bring forward publication means that the company can facilitate the declaration of a full bid some time before the original publication date on May 25th.
In addition to a payment of €2.20 per Eircom share, the proposal from Babcock and the Esot includes payment of a dividend of 5.2 cent per share.
That dividend payment is likely to be confirmed with Eircom's results on Monday.
Stockbrokers expect the company to declare revenues of some €1.6 billion in respect of its fixed-line business revenues of €51 million from Meteor, its newly-acquired mobile unit.
Brokers expect earnings per share in the region of 16.7 cent and pretax profits of around €111 million.
The market also expects an increase to 220,000 in the number of broadband connections by the end of March, up from 197,000 in February.
In a note last February, Goodbody said that increased fixed-line competition and a more aggressive push on growing mobile would have a negative near-term impact on the company's results, but better long-term benefits.
Following third-quarter results from Eircom, Goodbody reduced its earnings before interest, tax, depreciation and amortisation target by 3 per cent to €595 million from €616 million. At the same time, it reduced its adjusted earnings per share forecast by 12.4 per cent, to 19.1 cent from 26.7 cent.
